Pertise Personality Trait Blind Luck Doggedness Knowledge Distinctive

8/14/2019 Pertise Personality Trait Blind Luck Doggedness Knowledge Distinctive

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Robert H. Hacker rhhfla@mindspri 1

HTM 4292C

ENTREPRENEURSHIPTEACHING NOTES

ROBERT H. HACKERFALL 2008


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SALES 6 YEARS AFTERSTARTUP

Sales $ Millions Number of firms %

100 200 0.03%50 500 0.08%

5 9,500 1.6%


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ENTREPRENEURS

9% OF U.S. HOUSEHOLDS

39% OF TOTAL NET WORTH


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OUT OF BUSINESS IN 5YEARS

55 %


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KEYS TO SUCCESS

PICK RIGHT INDUSTRYAND OPPORTUNITY

MENTORING

CAPITAL


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ENTREPRENEURSHIP

Peter DruckerOften called the father of modern management as well as being known as the

entrepreneur's guru, Drucker viewed entrepreneurship as asystematic discipline. He wrote more than 39 books on the subject, includingthe seminal Innovation and Entrepreneurship Practice and Principles(Harper & Row), first published in 1985, and his last, Managing in the NextSociety(St. Martin's Griffin; 2003).

Innovation is the specific instrument of entrepreneurship,

the act that endows resources with a new capacity to create wealth.

Entrepreneurial management is not natural, creative, or spontaneous but

instead is based on a systematic, thoughtful approach.


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NUMBERS TALK !

When you can measure whatyou are speaking about, andexpress it in numbers, youknow something about it; butwhen you cannot measure it,when you cannot express it innumbers, your knowledge isof a meager andunsatisfactory kind: it may bethe beginning of knowledge,

but you have scarcely, in yourthoughts, advanced to thestate of science- Lord Kelvin
http://bespoke.lbl.gov/quoteshttp://bespoke.lbl.gov/quotes


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GREAT MINDS THINK ALIKE

A standard part of theinvestment process isto identify a

business model'skey variables andto generate scenarios

that test their impacton revenue and cash.Will Price Hummer Winblad

April 24, 2007

http://willprice.blogspot.com


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STAGES OF DEVELOPMENT

1. PROOF OF CONCEPT 0-$1MM

2. COMMERCIALIZATION $1-3MM

3. SCALING $3-10MM4. GROWTH $10-30MM

5. PROFESSIONALIZATION $30-100MM


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BUSINESS PLAN PROCESS

KEY OUTPUTS

BUSINESS CONCEPT BUSINESS MODEL FINANCIAL MODEL

CUSTOMER

NEED

TARGET

CUSTOMER

INDUSTRY

COMPETITION

PRODUCT &

TECHNOLOGY

SOLUTION

REVENUE

MODEL

PRICING

SALES &

DISTRIBUTION

HEADCOUNT

CAPEX

P&L

STATEMENT

BALANCE

SHEET

CASHFLOW

SOURCES &

USES

FEASIBILITY

DIFFERENTIAL

ADVANTAGE

GROWTH

DRIVERSFINANCIAL

PLAN

Growth Survival


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1.Customer Needs

Gerald Zaltman proposes seven metaphors, at thesubconscious level, that explain 70 percent of humanbehavior (as quoted from HBS Working Knowledge):

2. balance (equilibrium)3. transformation (changing states or status)

4. journey (as in life)5. container (keeping things in and keeping things out)6. connection (feelings of belonging or exclusion)7. resource (providing survival)8. control

http://ryanspoon.com/blog/2008/08/07/why-toyotas-scion-campaign-resonates-/http://www.theequitykicker.com/2008/09/01/the-pro

/
http://hbswk.hbs.edu/item/5952.htmlhttp://ryanspoon.com/blog/2008/08/07/why-toyotas-scion-campaign-resonates-with-the-social-web/http://ryanspoon.com/blog/2008/08/07/why-toyotas-scion-campaign-resonates-with-the-social-web/http://www.theequitykicker.com/2008/09/01/the-problem-with-market-researchhttp://www.theequitykicker.com/2008/09/01/the-problem-with-market-researchhttp://ryanspoon.com/blog/2008/08/07/why-toyotas-scion-campaign-resonates-with-the-social-web/http://ryanspoon.com/blog/2008/08/07/why-toyotas-scion-campaign-resonates-with-the-social-web/http://hbswk.hbs.edu/item/5952.html


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ReadWriteWeb-Sarah Perez

Most enterprise software sucks. That ismy considered opinion from 30 years inthe software biz. Words that come to mind

are: bloated, inflexible and user hostile.The good news is that it is getting better, alot better. The driver for change is what Icall the consumerization of enterprise

software. These new software championstypically have some if not all of these 8main attributes...Read more.
http://www.readwriteweb.com/archives/sharepoint_to_run_enterprise_2.phphttp://www.readwriteweb.com/archives/enterprise20_wave.phphttp://www.readwriteweb.com/archives/enterprise20_wave.phphttp://www.readwriteweb.com/archives/sharepoint_to_run_enterprise_2.php


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New Business Types

1. Do something better (market exists)

2. Do something in a new way (disruptivetechnology)

3. Do something new (highest risk)


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Disruptive Technology

http://video.hbsp.com/?plid=899067&showID

http://experiencematters.wordpress.com/200

http://experiencematters.wordpress.com/200
http://video.hbsp.com/?plid=899067&showID=730851http://experiencematters.wordpress.com/2008/02/28/customer-experience-innovation-as-simple-as-1-2-3/http://experiencematters.wordpress.com/2007/07/12/five-disruptive-customer-experience-strategies/http://experiencematters.wordpress.com/2007/07/12/five-disruptive-customer-experience-strategies/http://experiencematters.wordpress.com/2008/02/28/customer-experience-innovation-as-simple-as-1-2-3/http://video.hbsp.com/?plid=899067&showID=730851


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Austin on Creativity

Step Requirement

1 Interest You have to enjoy it to persist

2Preparation Study it

3 Incubation Keep working

4 Illumination Solutions Will come

5Verification ConfirmConclusions

6Exploitation Act


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BUSINESS PLAN PROCESS

KEY OUTPUTS

BUSINESS CONCEPT BUSINESS MODEL FINANCIAL MODEL

CUSTOMER

NEED

INDUSTRY

COMPETITION

PRODUCT &

TECHNOLOGY

SOLUTION

REVENUE

MODEL

PRICING

SALES &

DISTRIBUTION

HEADCOUNT

CAPEX

P&L

STATEMENT

BALANCE

SHEET

CASHFLOW

SOURCES &

USES

FEASIBILITY

DIFFERENTIAL

ADVANTAGE

GROWTH

DRIVERSFINANCIAL

PLAN

Growth Survival


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Austin-4 Kinds of Luck

Type of Luck Luck From Personality Trait Example

1An Accident Chance Happens Blind Luck Penicillin

2Exploration Energy in motion Doggedness Ford

3Sagacity Prepared Mind Knowledge Google

4Personality Unique Expertise Distinctive Behavior Macdonalds


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A Thought

Gabriel Garcia Marquez

Disbelief is more resistant thanfaith because it is sustained

by the senses


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2. Solution

Hypothesis

Iterative process

Evolving

NEED TO ANALYZE, VERIFY AND

CONFIRM


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Target Customer (MarketSegmentation)

BUSINESS CONCEPT

TARGET

CUSTOMER

INDUSTRY

COMPETITION

PRODUCT &

TECHNOLOGY

METHODS

Demographics

Market research

Talk to customers

Alpha/Beta test

Profitability analysis

Use them all


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Target Customer Example

BUSINESS CONCEPT

TARGET

CUSTOMER

INDUSTRY

COMPETITION

PRODUCT &

TECHNOLOGY

1. Woman

2. Single/divorced

3. With children

4. High schooleducation

5. Single wage earner

6. Rented home7. Car4 years old


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Target Customer Example

balance (equilibrium) transformation

(changing states orstatus)

journey (as in life) container (keepingthings in and keepingthings out)

connection (feelings of

belonging or exclusion) resource (providingsurvival)

control

Woman

Single/divorced

With children

High schooleducation

Single wage earner

Rented home Car4 years old

http://experiencematters.wordpress.com//
http://experiencematters.wordpress.com/2008/06/26/cxp-law-1-every-interaction-creates-a-personal-reactionhttp://experiencematters.wordpress.com/2008/06/26/cxp-law-1-every-interaction-creates-a-personal-reaction


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Porters Strategic Analysis

BUSINESS CONCEPT

TARGET

CUSTOMER

INDUSTRY

COMPETITION

PRODUCT &

TECHNOLOGY

Source:http://www.quickmba.com/strategy/porter.shtml


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PORTERS GENERICSTRATEGIES

1. COST ADVANTAGE

2. DIFFERENTIATION

3. FOCUS (NICHE/BUSINESS MODEL)4. HACKER-ACCESS TO CAPITAL

(EMERGING MARKETS)

SUSTAINABLE OVER LONG(ER) TERM


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Differential Advantage

BUSINESS CONCEPT

TARGET

CUSTOMER

INDUSTRY

COMPETITION

PRODUCT &

TECHNOLOGY

Unique or

Proprietary or

Patent or

Barrier to entry or

Regulation


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Porters Strategic Analysis

BUSINESS CONCEPT

TARGET

CUSTOMER

INDUSTRY

COMPETITION

PRODUCT &

TECHNOLOGY

Source:http://www.quickmba.com/strategy/porter.shtml


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Business Model

REVENUE MODEL

PRICE MODEL

SALES &DISTRIBUTION CAPEX

HEADCOUNT


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Sequoia Business Model

Revenue model

Pricing Average account size and/or lifetime value

Sales & distribution model

Customer/pipeline list

http://www.sequoiacap.com/ideas/


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WHAT IS GROWTH?

Sales increases improve productivity withno increase in resources

Growth requires the addition of significantresources (sales people, locations,capacity) and initially reduces productivity

Growth drivers determine where theadditional resources are required


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FOCUS OF THE BUSINESSMODEL

BUSINESS MODEL--WHAT DRIVES THEBUSINESS AND CREATES THE GROWTH

Growth Drivers Industry Translation

1Units Manufacturing Accounts

2New Locations Retail/Restaurants CAPEX

3Subscribers Web/Direct Mail Customer Acquisition Cost

4Distribution Consumer Products Outlets5Sales People Services Calls/Closes


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BUSINESS MODEL LOGIC

GROWTH DRIVERS EXPLAIN

BUSINESS MODEL REVENUE ASSUMPTIONS

EXPLAIN GROWTH DRIVERS

INDUSTRY KNOWLEDGEMAKES ASSUMPTIONS REAL


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REVENUE ASSUMPTIONS INDETAIL

Assumptions January-07 February-07 March-07 April-07 May-07 June-07

Revenue

Applications Processed 240 240 240 240 240 480

%Approved 85% 85% 85% 85% 85% 85%

Applications Approved 204 204 204 204 204 408

Fee Per Application $ 45 45 45 45 45 45

Application Revenue $ 9,180 9,180 9,180 9,180 9,180 18,360


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REVENUE ASSUMPTIONS INDETAIL

Assumptions Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07

Revenue

Total Locations Available 37 37 37 37 37 37

% Locations Awarded 15% 15% 15% 15% 15% 15%

Locations Awarded 6 6 6 6 6 6

Locations Operating 1 1 1 1 1 2Visitors Per Location per Mont 50,000 50,000 50,000 50,000 50,000 100,000

Customers % 0.07 0.07 0.07 0.07 0.07 0.07

Customers 3,500 3,500 3,500 3,500 3,500 7,000

Coordinators per Location 30 30 30 30 30 60

App. Proc./Coordinator 80 80 80 80 80 80

Applications Processed 2,400 2,400 2,400 2,400 2,400 4,800

% Approved 85% 85% 85% 85% 85% 85%

Applications Approved 2,040 2,040 2,040 2,040 2,040 4,080

Fee Per Application $ 45 45 45 45 45 45

Application Revenue $ 91,800 91,800 91,800 91,800 91,800 183,600


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REVENUE MODEL SPECIFICCOSTS

Revenue Models Operating Expense

1 Units (stores, franchises) Store operating expense

2 Subscribers (telecom, cable tv) Customer acquisition cost

3 Sales People Total cost of sales person4 Response Rate (direct mail, non-profits) Cost of mailing

5 Visitors (amusement park) Customer acquisition cost

6 Click Through/Response Rate (websites) Cost per visitor

7 Distribution Points (food manufacturing) Total cost of sales person

8 Distributors (re-sellers) Support cost

Customer Service

Costs can be a mix of more than one type


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Business Model CONTD

PRICING

CAPEX HEADCOUNT


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BUSINESS MODEL SUMMARY

1 2 3 4 5

Sales People 3 10 20 40 80Revenue/Sales Person Annualized 1,500,000 1,200,000 800,000 800,000 800,000

Sales Person EBITDA Contribution 450,000 330,000 170,000 170,000 170,000

Revenue 1,200,000 7,200,000 12,000,000 24,000,000 40,000,000

Gross Margin $ 480,000 3,024,000 5,280,000 11,040,000 19,200,000

Gross Margin % 40% 42% 44% 46% 48%

Operating Expense 900,000 2,700,000 4,200,000 7,500,000 11,000,000

EBITDA (420,000) 324,000 1,080,000 3,540,000 8,200,000

EBITDA % -35% 5% 9% 15% 21%

NewInvestment 1,500,000 3,000,000 2,000,000 - -

YEAR


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SOURCES AND USES


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REAL VC

Sure signs of a thoughtfulmanagement team are:

the ability of the managementteam to articulate the materialbusiness drivers in the model

to test the impact of the variableson material financial metrics to sanity check the assumptions

with market comps - i.e. not tobase the business on ablack swan outcome

to focus the management teamand company KPIs on theidentified variables.

the inclusion of scenario analysesin investor presentation

Will Price Hummer Winblad

April 24, 2007

http://willprice.blogspot.com
http://en.wikipedia.org/wiki/The_Black_Swan_%28book%29http://en.wikipedia.org/wiki/The_Black_Swan_%28book%29


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HOW MUCH MONEY TO RAISE?

ATTEND FINANCIAL PLANNINGWORKSHOP

END OF MORNING SESSION


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R b t H H k hhfl @ i d i 40

CONTACT

ROBERT H. HACKER

[email protected]

http://Sophisticatedfinance.typepad.com FB

305-742-8222
mailto:[email protected]://sophisticatedfinance.typepad.com/http://sophisticatedfinance.typepad.com/mailto:[email protected]

Pertise Personality Trait Blind Luck Doggedness Knowledge Distinctive

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