Business Models

What’s new?

Dave Mawhinney
Donald H. Jones Center for Entrepreneurship
Managing Director, Open Field Entrepreneurs Fund
October 10, 2011
Business Model Canvas is a strategic
management and lean startup template
for developing new or documenting
existing business models. It is a visual
chart with elements describing a firm's
or product's value proposition,
infrastructure, customers, and
finances. It assists firms in aligning
their activities by illustrating potential
trade-offs.
 Game Changers in
your Generation?

World Open Source LAMP Cloud

Wide Software Stack Computing
Web
 The Long Tail

What Business Models

were Enabled?
"We sold more books today that
didn't sell at all yesterday than we
sold today of all the books that did
sell yesterday.“
Josh Petersen, Amazon Employee explaining the long tail to a colleague
that did not get it
"Netflix members love watching instantly, but we've come to
recognize there is still a very large continuing demand for DVDs by
mail," said Andy Rendich, Netflix Chief Service and Operations
Officer. "By better reflecting the underlying costs and offering our
lowest prices ever for unlimited DVD, we hope to provide a great
value to our current and future DVD-by-mail members."

Verdict? 15.71% Love it 84.29% Hate it

Source: Huffington Post
“Give your service away for free, possibly ad supported but maybe not,
acquire a lot of customers very efficiently through word of mouth, referral
networks, organic search marketing, etc., then offer premium priced value
added services or an enhanced version of your service to your customer
base.” Fred Wilson, Union Square Ventures
Freemium
Services
Virtual Goods?!?
 Shout-out for Non-Tech
Innovative Business Model

Co-opted Customer to Provide Key Activities

to Improve the Value Proposition
New Models for Partnering
Business Models
What’s new?

Dave Mawhinney
Donald H. Jones Center for Entrepreneurship
Managing Director, Open Field Entrepreneurs Fund
October 10, 2011
FORECASTING THE REVENUES OF THE BUSINESS
AND COSTS TO BE INCURRED
START UP COSTS
 Start up capital is the amount of money that is
needed to buy the facilities and equipment, to
register and license the business and get necessary
certificates.
 Working capital includes the costs of raw materials,
packaging, staff training, product promotion etc.
that have to be made before the business begins to
generate income from sales. Formula: Working
Capital (WC) = Current Assets (CA) – Current
Liabilities (CL)
 Start up capital and initial working capital
are calculated to determine whether the
entrepreneur’s savings will be sufficient to
start the business without loan.

 The requirement for working capital also

continues as the business develops and a
cash flow should be prepared. Requirements
for working capital will differ among types
of business. This is because of the seasonal
nature of the raw materials needed and
other ingredients.
OPERATION COSTS

 Fixed Costs are expenses that have to

be paid even if no production takes
place.

• Variable costs depend on the amount of

product that is produced.
 INCOME AND PROFIT
 Gross profit (or gross loss) is the difference
between expected income and total operating
costs over the first year, including loan
payments.
Formula:
Gross Profit (GP) = Income or Revenue – Expenses

 Income is calculated based on the selling price

per unit multiplied by number of units sold.
Formula:
Income = SP/unit x no. of units sold
CASHFLOW FORECAST shows
whether there is sufficient cash
available to operate the business
without the need for further loans.
Activity:

Prepare a cash flow forecast for your

business plan by using the template below:
MONTH J F M A M J J A S O N D TOTAL

                         
Income
                         
Expenses
                         
Cumulative
Profit/Loss