Key Management Concepts
for New Businesses
Carmela Aquino, Kelly Ling, Tom Haywood
UCB New Business Practicum
Agenda
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Introductions (7:10-7:15)
Business Model Canvas (7:15-7:30)
Financial Management Basics (7:30-7:45)
Marketing Fundamentals (7:45-8:00)
Mastering Your Pitch (8:00-8:15)
Q&A (8:15-8:30)
Introductions:
Who are you?
Why are you here today?*
* There is no confidentiality guaranteed in the open forum.
Who We Are: UC Berkeley Haas
● Focus on instilling
entrepreneurial
mindset among
students
● Team-focused
learning environment
● Emphasis on
defining principles
Things We’re Learning
● Question the Status Quo: In order to provide true value,
really understand the pain point you are addressing for the
customer you are serving, and think: how might we… ?
● Student Always: Have a growth mindset! Some of the most
successful businesses were ones that were not afraid to
iterate on their business model and pivot when necessary
● Confidence Without Attitude: In order to grow, constantly
seek feedback, stay humble, and keep doing better work
● Beyond Yourself: When you’ve made it, pay it forward!
Business Model Canvas
How to Use the Business Model Canvas
The Business Model Canvas is a useful tool for
assessing your business. It is encouraged to
get you to think deeply about the questions that
underpin the unique value of your business.
Exercise:
Sketch out the canvas for your
business today - feel free to ask
questions along the way
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Who are our
Key Partners?
What Key Activities
do our Value
Propositions
require?
Who are our
key
suppliers?
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What Key
Resources do our
Value Propositions
require?
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Which one of
our customer’s
problems are
we helping to
solve?
Which
customer
needs are we
satisfying?
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2
What type of
relationship does each
of our Customer
Segments expect us to
establish?
3
Through which
Channels do our
Customer Segments
want to be reached?
For whom are
we creating
value?
Who are our
most
important
customers?
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What are the most important costs
inherent in our business model?
For what value are our customers really
willing to pay? How do we make money?
Financial Management Basics
Time Value of Money
¨What would you prefer? $100,000 today? Or $250,000 in seventeen years?
*Assuming an interest rate, r = 5%
Key Takeaways
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A “cashflow” is a time-dated money amount
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You can only compare cashflows at the same
point in time
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In order to compare, we need to convert the
future cash flows into present values
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The higher the risk, the higher the discount rate
How do we find r?
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Sometimes it is given, such as interest
rate for bank accounts
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Sometimes it is unknown, so we need to
make assumptions
Accounting 101
Balance Sheet
Assets: What you “have” today
(ex/ cash, receivables, inventory,
fixed assets)
Liabilities: What you “owe” today
(ex/ debt)
Equity: What you’re “worth” today
(ex/ capital stock)
Golden formula:
Assets= Liabilities + Equity
Income Statement
Statement of Cashflows
1.What is sold in the period
1. Cash at start of period
Minus(-)
Plus(+)
2. What it costs to make
2. Cash received in period
Minus(-)
Minus(-)
3. Selling & general expenses for
the period
3. Cash spent during period
Equals(=)
Income for the period
Equals(=)
Cash on hand at end of
period
Unit Economics
Unit Economics
Unit economics - the direct
revenues and costs associated
per unit for your business model
Customer Acquisition Cost
Customer Lifetime Value
Customer Acquisition Cost
(CAC) - the cost to acquire a
single customer - typically through
sales and marketing
Customer Lifetime Value
(LTV) - the total revenue a
single user generates over the
course of his or her use of your
service
Customer Payback Period - the
time in months to fully pay back
the CAC
LTV = Churn Rate * Gross
Margin
Customer Payback Period =
CAC / Gross Margin
Unit Economics =
Revenue per Unit - Cost per
Unit
Unless B2B, you want a shorter
CAC payback period (6-18 mos)
If LTV > CAC, you have a
sustainable business model
Funding Your Business
2007 U.S. Census Survey of Business Owners
● Of the firms that required
start-up capital, 3 in 10
launched their business with
less than $5,000
● Only 1.5% of the firms
needing start-up capital
required $1M or more to
start their businesses
Source: U.S. Census Bureau
Other Sources of Funding
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Own Money
Friends and Family
Angels
Incubators
VCs
Banks
Grants
Vendor Financing
Corporations
Valuation for Startups (An Example)
Assumptions
Company A
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Profits in 5 years: $2.5M
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Multiple (Comparable): 15x
profits
Investor
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Investment: $2.0M
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Expected Return: 50%
(Annual)
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Time to Liquidity: 5 years
The Bottom Line
● It doesn’t matter what recordkeeping software you use
or if you choose to use Excel - just make sure you
have a system in place
● Get used to thinking about money in the present value
- remember that you can’t simply compare the
numerical value of future earnings with money now
● Figure out your unit economics to understand if you
are in a sustainable business
Exercise:
Think about the components that
should go into a calculation of
your Customer Acquisition Cost
(CAC) and Customer Lifetime
Value (LTV)
Financial Resources
Accounting for Startups
https://www.waveapps.com/startup-resources/
http://www.quora.com/What-accounting-software-do-startups-utilize-Which-programs-are-best-suited-for-start-ups
http://venturebeat.com/2014/01/27/the-best-back-office-software-for-small-businesses/
Unit Economics
http://www.bvp.com/blog/bessemer-cloud-computing-law-6-build-revenue-engine
http://kellblog.com/2014/07/30/the-ultimate-saas-metric-ltv-cac/
Valuation and Venture Finance
http://fundersandfounders.com/how-startup-valuation-works/
https://www.coursera.org/course/venturefinance
http://www.persistentchange.com/leverage-startup/nondilutive-financing-leverage-startup-part-1/
Marketing Fundamentals
Marketing Strategy
Startup Metrics for Pirates: AARRR!*
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Acquisition - Getting someone to come to your site
or become aware of your brand (ie. social media)
Activation - Starting a relationship with a visitor or a
prospect by getting some commitment (ie. getting a
sign-up for a free trial)
Retention - Seeing a customer try your product
multiple times and become an active user
Referral - Encouraging your active users to refer
new prospects to your business (ie. through
monetary and non-monetary incentives)
Revenue - Gaining revenue from an action that your
customer takes (ie. upgrading from a free to a paid
subscription)
* Coined by Dave McClure (500 Startups)
Source:
http://www.slideshare.net/dmc500h
ats/startup-metrics-for-pirates-longversion
Acquisition & Activation
Acquisition
1. Find the marketing channels
that can deliver for you:
● Largest volume (#)
● Lowest-cost ($)
● Best-performing (%) in
terms of conversion for you
2. Capture your prospects
● Use a Customer
Relationship Management
system
Activation
1. Get your prospects to engage
with you:
● Experiment with your
outward-facing content to
encourage clicks,
downloads, etc.
1. Turn prospects into leads:
● Classify as leads based on
behaviors that show
commitment (ie.
downloading a whitepaper)
Retention & Referral
Retention
1. Continue engaging with your
leads to encourage use
● Regular content (blog)
● Automated e-mails
(lifecycle, event-based)
1. Encourage repeat use from
customers
● Offer relevant content
● Provide incentives for repeat
use (ie. tiered pricing)
Referral
1. After a positive experience,
encourage your customers to
refer you
● Make the ask explicit
● Offer incentives for referral
(ie. usage bonuses)
Customer Relationship Management
● Where are you seeing a drop-off in your customers?
● Having a customer relationship management system in
place allows you to identify leaks in your funnel
o
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Salesforce - most fully-featured
Insightly - deep integration with Google, Microsoft
Nimble - has social media integration features
ZohoCRM - integrates with Zoho system, cloud-based
Batchbook
ContactMe
The Bottom Line
● Use the Business Model Canvas to think about your
company’s mission and overall strategy - this will
inform your marketing strategy
● Understand your customer acquisition funnel using
the AARRR framework - identify your problem areas in
this funnel
● Track your encounters with prospects, leads, and
customers through a customer relationship
management system
Exercise:
Think about how the Customer
Acquisition Funnel looks like for
your business. Where do you
think you see the greatest need
for improvement?
Mastering Your Pitch
Storytelling
The 10/20/30 Rule of PowerPoint
10
Slides
1. Problem
2. Your solution
3. Business model
4. Underlying magic/technology
5. Marketing and sales
6. Competition
7. Team
8. Projections and milestones
9. Status and timeline
10. Summary and call to action
20
Minutes
General Rule of Thumb for
investor or competition pitcheseven if more time slotted, leaves
room of Q&A and discussion
30
Size Font
General Rule of Thumb for
investor or competition pitcheseven if more time slotted, leaves
room of Q&A and discussion
Read More:
http://blog.guykawasaki.com/2005/12/the_102030_rule.html#ixzz3HNWfQESL
Resources
Example Pitch Decks
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Airbnb
PinMyPet
http://bestpitchdecks.com/
http://www.pitchenvy.com/
Good Reads
1. Lean Startup - Eric Reise
2. Innovator's Dilemma Clayton Christensen
3. The Startup of You - Reid
Hoffman and Ben Casnocha
4. Art of the Start - Guy
Kawasaki
Exercise:
Think about your existing pitch how do you think you can
improve it?
Questions?
Contact Us
Carmela Aquino
carmela_aquino@mba.berkeley.edu
Kelly Ling
kelly_ling@mba.berkeley.edu
Tom Haywood
tom_haywood@mba.berkeley.edu