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MONETIZING THE BUSINESS MODEL
MBA LITE FEBRUARY 17, 2014
DAN QUIGG BIO
25 Years Technology Executive Founder & CEO, Public Insight Corporation President & CEO, RIS Logic acquired by Merge Healthcare Founder & CEO, OmniVista acquired by Best Software General Manager, Best Analytics (acquired by Sage) KPMG Small Systems Co-Founder
CEO - Public Insight Corporation Developers of 360-Public Goal of transforming public data into insight
Kent State University Adjunct Professor of Entrepreneurship Awards and Groups
Ernst & Young Entrepreneur of the Year Finalist Smart Magazine “Rising Star” Case Western Reserve Inaugural Leadership Award Leadership Cleveland Class of 2013
Follower of Jesus Christ
MY FAVORITE READS
BUSINESS MODEL FRAMEWORK
Source: Business Model Institute
Our F
ocus
GOAL: BUILD ENTERPRISE VALUE Value of an Organization Exit Value Functions:
Growth Rate Recur Revenue Scalability Margins Risk Mkt Potential
Entrepreneur Decisions: Capital vs. Bootstrapping Acceptable Cash “Burn” Founder Salaries
Service Co. Software Co.Base Year 100,000 100,000 Growth Rates:
Year 2 300% 500%Year 3 100% 300%Year 4 70% 200%Year 5 50% 100%
2,040,000 14,400,000 Liquidation: Revenue 1 4 Exit Value 2,040,000 57,600,000 Leverage 28.24
Company Products Sold To Capital Sale Amount Exit Timeline
OmniVista Active Planner Advanced Allocations Financial Reporter Premier Budgeting
Best Software $85k $7 Million 2 ½ years
RIS Logic RIS Logic Merge Healthcare $2.1 Million $16-24 Million 2 ½ years
BEACHHEAD MARKET ENTRY
“Paying” Customers Not “Fun With Spreadsheets” Innovative – Not “Me Too” Primary, then Secondary Go For the Beachhead!
THE CORE
Zook – Profit from the Core
Core
Adjacency
Adjacency
Adjacency
Adjacency
AdjacencyAdjacency
WHAT IS A CORE?
The Core is something that allows you to deliver the benefits your customers value with much greater effectiveness than any other competitor.* What it is Not?
IP First mover advantage Locking up suppliers
Pivoting: Typically a change in core Average successful pivots 1.8 Not a change in primary market
* Disciplined Entrepreneurship
SOURCES OF DIFFERENTIATION
Zook – Repeatabillity
Must have at least three
AVOID THESE TERMS
MINIMUM VIABLE BUSINESS PRODUCT (MVBP)
1.Customer Gets Value2.Customer Pays for Value3.Product is Sufficient to Start
the Feedback Loop4. Iterate Towards a Better
Product
ECONOMIC ECOSYSTEM
Source: Wide Lens
EXAMPLE
Segment Providers Consumers Those Who Care
K-12 School Districts Parents and Students
MediaService CentersConsultantsUnionsState
Higher Education
Colleges and Universities
ParentsStudents
K-12Trade AssociationsConsultantsLibraries
Health Care ProvidersInsurance Companies
Patients Non-ProfitsLibrariesTrade AssociationsConsultants
Government State and Local Entities
Constituents StateMediaPlanning Agencies
Business Business/Labor Mkts
General Public LibrariesEconomic Develop.
2 1Free
PRICING FRAMEWORK
Goal of Lifetime Value Costs are Irrelevant Understand Value Pay Attention to Decision Process Understand Price Alternatives Different Types Will Pay Different Prices Be Flexible for Early Adopters and
“Lighthouse Customers” It is Always Easier to Drop the Price
Than Raise it
UNDERSTAND COSTS OF CUSTOMER ACQUISITION
Source: Disciplined Entrepreneur
Time Horizons Year 1 Years 2 and 3
Years 4 and 5
PIPELINE CONVERSION
SCENARIO PLANNING
METRIC DRIVEN REVENUE FORECASTING
Gross User Licenses 5 10 15 25 Cumulative User Licenses 5 15 30 55 Average Annual Subscription Price 400 400 400 400 New Cash Subscriptions 2,000 4,000 6,000 10,000 Renew al Percentage 85% 85% 85% 85%Renew al Subscribers - - - - Renewal Cash Subscription - - - - Cumulative Subscriptions 2,000 6,000 12,000 22,000 New Subscription Revenue 167 500 1,000 1,833 Previous Years Revenue RecognitionMonthly Revenue 167 500 1,000 1,833 Consulting Estimate 0% 0% 0% 0%Consulting Revenues - - - - Subscriber Cancellations - - - - Cumulative Subscriber Cancellations - - - - Active Subscribers 5 15 30 55
CASH FLOW PLANNING
Cash Flow Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12
Beginning Cash (77,294) (108,711) (143,715) (195,422) (250,552) (279,676) (307,216) (329,041) (339,156) (344,379) (344,567) (340,341)
Inflows:Existing Member Fees 860 8,565 2,423 - 7,285 3,703 - - - - - - New Member Fees 25,000 25,000 25,000 25,000 25,000 25,000 37,500 37,500 37,500 37,500 37,500 37,500 Renewal Fees - - - - - - - 9,375 9,375 9,375 9,375 9,375 Referral Fees 300 850 1,600 2,450 3,450 4,800 6,400 8,150 10,000 12,000 14,050 16,625 Direct Service Fees - Contingency 9,600 12,000 14,400 16,800 19,200 21,600 24,000 24,000 26,400 28,800 31,200 33,600 Direct Service Fees - Project 900 2,100 3,300 4,200 5,100 6,600 8,100 9,300 10,200 11,100 11,700 13,575
36,660 48,515 46,723 48,450 60,035 61,703 76,000 88,325 93,475 98,775 103,825 110,675
Outflows:Salaries and Wages (Burdened) 52,321 52,914 52,825 57,975 58,554 58,638 67,219 67,835 68,093 68,358 68,610 68,953 Operating Expenses 13,755 28,605 28,605 28,605 28,605 28,605 28,605 28,605 28,605 28,605 28,605 28,605 Sourcing Office Advances/Earned 2,000 2,365 2,278 2,362 2,927 3,008 3,705 4,306 4,557 4,815 5,061 5,395
68,076 83,884 83,707 88,942 90,086 90,251 99,529 100,746 101,255 101,778 102,277 102,953
Net Operating Cash Generated (Used) (31,417) (35,370) (36,984) (40,492) (30,051) (28,548) (23,529) (12,421) (7,780) (3,003) 1,548 7,722
Capital CostsOther Capital EquipmentPrepaid SO Marketing FeeOrganization CostsAccounts Payable ReductionCommunity Web Site 15,000 15,000 Sourcing Office Advance Reduction (365) (278) (362) (927) (1,008) (1,705) (2,306) (2,557) (2,815) (2,678) New Hire Capital Costs - - - - - - - - - - - -
- (365) 14,722 14,638 (927) (1,008) (1,705) (2,306) (2,557) (2,815) (2,678) - Financing
Loans From Related PartiesCapital Contributions
- - - - - - - - - - - - Net Cash Generated (Used) (31,417) (35,005) (51,707) (55,130) (29,124) (27,540) (21,824) (10,115) (5,223) (188) 4,226 7,722 Ending Cash before Distributions (108,711) (143,715) (195,422) (250,552) (279,676) (307,216) (329,041) (339,156) (344,379) (344,567) (340,341) (332,619)
Distributions:Cash Distributions
- - - - - - - - - - - - ENDING CASH (108,711) (143,715) (195,422) (250,552) (279,676) (307,216) (329,041) (339,156) (344,379) (344,567) (340,341) (332,619)
QUESTIONS
CONTACT INFORMATION:Dan Quigg, [email protected]: 440-317-0117561 Boston Mills Rd., Suite 500Hudson, OH 44236www.publicinsightcorp.com