ENTR4800 Class 4: Identifying Business Potential

transcript

ENTR 4800: Social Entrepreneurship

Class 4: Identifying Business Potential

Monday, October 4, 2010

Instructors: Norm Tasevski (norm@socialentrepreneurship.ca)

Karim Harji (karim@socialentrepreneurship.ca)

Agenda

•  StickerYou •  What did we learn – Last Week? •  “Live” Case – Hedvig Alexander (Founder, Jali

Designs) –  How do we assess business potential for social enterprise? –  Assess Jali’s Business Potential

•  What did we learn – Today? •  Next week

Last Week – What did we learn?

Hedvig Alexander…

Assessing Social Enterprise Business Potential…

A Caveat…

When we assess business potential, we don’t just care

about…

…and…

…we also care about…

Our Strategy…

1.  Assuming the perfect scenario, does our business model generate money?

If yes…

2.  Does the model still make money once real world conditions are factored in?

What is a “Perfect” Scenario?

–  Porter’s 5 Forces line up perfectly (i.e. low to no entry barriers)

–  You operate absolutely efficiently (e.g. resources used to their maximum capacity)

–  The business runs flawlessly (i.e. no mistakes are made anywhere along the value chain)

Why Use a “Perfect” Scenario?

Most Importantly: –  If you can’t make money even with the most ideal

conditions…

Also: –  The perfect scenario is often the easiest to build a financial

model from –  It provides a baseline – All other scenarios can be

measured against this ideal case

…STOP! (…and rethink your business model)

Ready?…

Remember This?

Step 1: Identify Cost Drivers and Revenue Sources!

Value Proposition

-Procurement!-Receiving!-Warehousing!-Inventory control!-Product/service design!-Product/service manufacture/development!-Product packaging!-Technology support!-etc.!

-Licensing fees!-Donated products/services!

Customer Segments

-Research costs (surveying, interviewing, etc)!

-Payments!-(Viral marketing of products)!

Channels

-Warehousing!-Product packaging (in delivery boxes, etc)!-Product/service delivery (transportation, etc)! -Co-branding!

-Rental fees!-”Concession stand” type contracts!

Relationships

-Hard marketing costs (billboard advertising, etc)!-Soft marketing costs (website, etc)!-Customer service!-Relationship management personnel!

-3rd Party advertisers!-Co-branding!-Referral fees!

Exercise: Identify Cost Drivers and Revenue Sources on the Revenue Side of Jali Designs’ Business Model!

Key Resources

-Employees (management, staff)!-Brand!-Other assets (buildings, IP, software, etc)! -Licensing fees!

Key Activities

-Service activities!-Sales activities!-Client engagement activities!-Events ! -Fees (e.g. ticket sales

at events!

Key Partnerships

-Partnership management costs (relationship building, contract management, etc)!

-Investment!-Loans!-Grants/donations!

Exercise: Identify Cost Drivers and Revenue Sources on the Cost Side of Jali Designs’ Business Model!

Step 2: Calculate your margin!

-???!-???!

What Do You Need To Calculate Your Margin?

Data!!!!

Data Sources

Call key industry players (suppliers, competitors, etc)

Search databases (industry, scholastic, etc)

Conduct web search (Google, etc)

Ask people!!! (friends, potential customers, etc)

Exercise: Brainstorm the data points Jali Designs Requires to calculate its margin!

What did we learn?

Next Week (after reading week)

•  Guest speaker (to be confirmed)

•  Deliverable: The Cost Side of your Business Model!

•  Readings