APS1015 Class 5 - Intervening in Systems Part 2
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Transcript of APS1015 Class 5 - Intervening in Systems Part 2
APS 1015: Social Entrepreneurship
Class 5: Intervening in Social Systems(part 2)
Monday, May 26, 2014
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Instructors:Norm Tasevski ([email protected]) Alex Kjorven ([email protected])
© Norm Tasevski
Agenda
• Recap of Empathy Mapping & Business Modelling(last class)
• Building an Intervention– Step 3: Financial Modeling– Step 4: Target Setting
• Prep for Monday
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© Norm Tasevski
Intervening – A 4 Step Process
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Step 1: Empathy Mapping
Step 2: Business Modeling
Step 3:Financial Modelling
Step 4:Target Setting
© Norm Tasevski
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• For our purposes, this is a process for determining whether business model generates a viable margin
• Who determines viability?
• The Steps:– Assess revenue model (# units, unit price)
– Assess expense model (fixed, variable)
– Generate margin
Financial Modeling
© Norm Tasevski
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• Step 1: Assess Revenue Model– 2 parts: # units sold and price/unit
– How do we define a “unit”?• The value proposition perceived as having value by the
customer, and to which the customer is willing to pay a price
– The relationship between units and price:• The more “custom” a unit, the fewer that can be offered
and the costlier the unit is to make. The product is perceived as more valuable, and therefore price is higher
• The more “commoditized” a unit, the more that can be offered and the cheaper the unit is to make. The product is perceived as less valuable, and therefore price is lower
– How do we determine price?• This is…complicated
Financial Modeling
© Norm Tasevski
Financial Modeling – Determining Price
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Determine cost + desired margin(see step 2)
Ask people!!!(friends, potential customers, etc)
© Norm Tasevski
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• Step 2: Determine Cost Model– 2 parts: fixed costs, variable costs
• Fixed:– The costs that don’t change as more units are sold
– Example: rent
– Goal: determine the total fixed costs incurred
• Variable:– The costs that do change as more units are sold
– Example: raw materials used to build the product
– Goal: determine the per unit fixed costs incurred
• A note: all fixed costs are variable over time!
Financial Modeling
© Norm Tasevski
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Your Best Friend…
Break
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© Norm Tasevski
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• The key business and social metrics used to execute the business model in a way that aligns with the financial model
• Business targets:– Revenue targets (e.g. # units sold in the quarter)
– Expense targets (e.g. target marketing budget)
• Social targets:– “Output” targets (e.g. # people employed)
– “Outcome” targets (e.g. increase in community resiliency)
• SMART
Target Setting
© Norm Tasevski
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• Baseline vs. Target– Baseline: your starting point – the reference metrics
– Target: the measurable improvement from the baseline
• Linking targets to the business model – Each element of the canvas deserves their own metrics (e.g. target #
customers, target #/type of activities to run)
Target Setting
© Norm Tasevski
What did we learn?
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