FIU Entrepreneur’s
How To Webinar Series
How to Develop
the Business Concept
ROBERT H. HACKER
November 10, 2009
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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Sales 6 Years After Start-up
Sales $ Millions Number of firms
100
200
50
500
5
9,500
<5
579,800
Total
590,000
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
%
0.03%
0.08%
1.6%
98.3%
100%
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Out of Business in 5 Years
55 %
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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Keys to Success
• PICK RIGHT INDUSTRY AND
OPPORTUNITY
• MENTORING
• CAPITAL
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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Stages of Development
•
•
•
•
•
PROOF OF CONCEPT
COMMERCIALIZATION
SCALING
GROWTH
PROFESSIONALIZATION
Robert H. Hacker rhhfla@mindspring.com
Robert
0-$1MM
$1-3MM
$3-10MM
$10-30MM
$30-100MM
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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The Process
GROWTH
SURVIVAL
STEP 1
STEP 2
STEP 3
CUSTOMER
CONCEPT
INDUSTRY
Robert H. Hacker rhhfla@mindspring.com
Robert
STEP 4
STEP 5
BUSINESS MODEL FINANCIAL MODEL
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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Austin on Creativity
Step
1 Interest
Requirement
You have to enjoy it to persist
2 Preparation
Study it
3 Incubation
Keep working
4 Illumination
Solutions Will come
5 Verification
Confirm Conclusions
6 Exploitation
Act
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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1.Customer Needs
1.
2.
3.
4.
5.
6.
7.
Gerald Zaltman's seven metaphors for the
subconscious that explain 70 percent of human
behavior
Balance (equilibrium)
Transformation (changing states or status)
Journey (as in life)
Container (keeping things in and keeping things out)
Connection (feelings of belonging or exclusion)
Resource (providing survival)
Control
As quoted from HBS Working Knowledge)
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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1.Customer Needs
Examples of Zaltman
1.
2.
3.
4.
5.
6.
7.
Balance-Starbucks
Transformation-AMEX cards
Journey-University of Phoenix
Container-LG refrigerators
Connection-FaceBook
Resource-FEMA
Control-TurboTax
As quoted from HBS Working Knowledge)
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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1. Customer Needs
NINTENDO APPROACH
1.
2.
3.
DO NOT FOCUS ON PRODUCT--GAMEBOY
DO NOT FOCUS ON COMPETITION--MICROSOFT,
SONY
FOCUS ON DEFINING THE NEED--WHAT TO DO IN
SPARE TIME
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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1. Customer Needs
ABUNDANCE APPROACH
1. What is abundant—CARS
2. What is scarce about cars—honest, hassle
free buying
3. Scarcity Solution--CARMAX
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 1: Customer Needs
New Business Types
1. Do something better (market exists)
2. Do something in a new way (disruptive
technology)
3. Do something new (highest risk)
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 1: Customer Needs
New Business Types
1. Do something better--GOOGLE
2. Do something in a new way--Amazon
3. Do something new--Penicillin
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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A THOUGHT
Disbelief is more resistant than faith because it
is sustained by the senses
Gabriel Garcia Marquez
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 1. Customer Needs
Deliverable--Value Proposition
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
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STEP 1. Customer Needs
Value Proposition
Product or service to satisfy a customer need for
economic benefit (or social utility)
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
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2. Solution
•
•
•
•
Hypothesis
Iterative process
Evolving
Stalking horse
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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2. Solution
Hypothesis—Until $3+ million in revenue
—Until scaling begins
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 3: Industry Analysis
Porter’s Strategic Analysis
Source:http://www.quickmba.com/strategy/
Robert H. Hacker rhhfla@mindspring.com
Robert H.http://sophisticatedfinance.typepad.com
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porter.shtml
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STEP 3: Industry Analysis
Porter’s 3 Strategies
1.Low Cost
2.Differentiation
3.Focus
4.Access to Capital--Hacker
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 3: Industry Analysis
Porter’s 3 Strategies
1.Low Cost—Wal-Mart
2.Differentiation—Apple
3.Focus—Cisco
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 3: Deliverables
• Differential Advantage
– Unique, Sustainable And Proprietary
• Target Customer
– Characterize In Depth Who You Are
Going To Sell To
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 3 Deliverables
Barrier to Entry
—What keeps out the competition from
your market
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 4: Business Model
•
•
•
•
•
Revenue Model
Pricing Model
Sales & Distribution Strategy
Capex
Headcount
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 4: Business Model
GROWTH
1. Requires capital to achieve
2. Not a productivity improvement
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 4: Business Model
EARLY STAGE OBJECTIVES
BY PRIORITY
1. Grow Revenues
2. Reach Cash Flow Positive
3. Profitability
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 4: Business Model
Revenue Model
WHAT DRIVES THE BUSINESS AND
CREATES THE GROWTH
SANDS
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 4: Business Model
Revenue Model
GROWTH DRIVER ASSUMPTIONS
1.
2.
3.
4.
5.
6.
Explain business logic
Demonstrate industry knowledge
Clarify business risk
Clarify management requirements
Determine KPIs
Build financial model (next step)
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 4: Business Model
15-Pricing Models
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 4: Business Model
Sales & Distribution
SALES STRATEGY
How are you going to reach the customer and close
DISTRIBUTION STRATEGY
How are you physically going to deliver the product
(Web services—bandwidth, servers, etc.)
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 5: Financial Model
• PURPOSE OF FINANCIAL MODELS
–
–
–
–
–
Demonstrate market opportunity (size)
Clarify/reinforce business model
Demonstrate industry knowledge
Present business logic
Understand cash flow
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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STEP 5. FINANCIAL MODEL
• PARTS OF A FINANCIAL MODEL
–
–
–
–
–
BUSINESS MODEL ASSUMPTIONS
SOURCES AND USES
P&L
BALANCE SHEET
CASH FLOW STATEMENT
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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MY CONTACTS AND
ON-LINE RESOURCES
ROBERT H. HACKER
rhhfla@mindspring.com
305-742-8222
Blog: Sophisticated Finance
Robert H. Hacker rhhfla@mindspring.com
Robert
H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com
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