Business 101.1 class 9 NYU ITP

Business 101.1A class in business. And entrepreneurship.

Fall 2016NYU ITP

November 14, 2016

Josh KnowlesJen van der Meer

Extra love from Tom IgoeAnd the Leslie E-Lab

Syllabus Map

START + Form

Teams

Business Models

Customer Development

How to Interview Value

+ The Purpose of Business

ValuesMotivation

TeamCustomer

Relationships+ Channels

AnalyticsKey Resources

Activities Partners Biggest Vision

Analyze Test

The Money

Plan MVP

Turning Insights Into

Features

More MVP

How small, How big?

Launch MVP

Lessons Learned

Go/No Go?

Sketch Paper Prototype

Oz Test

Smallest MVP

Tech Architecture

THINGS CHANGED

THINGS CHANGED.

Business models are for people

Business models are for people

Business model innovation in 5 hard steps

Business model innovation in 5 hard steps

1. Define your vision.

2. Include People

3. Search for the starter model that launches your vision

4. Get out of the building.

Whom do you want to serve?

What problem do you see?

ALWAYS START WITH THE CUSTOMER:

Customer Segments

Customer Relationships

Value PropositionKey ActivitiesPartners

Key Resources Customer Channels

RevenuesCosts

Source: Strategyzer Osterwalder, Pigneur

Whom are you here to serve?


Get out of the building


Customer Segments


Value Proposition

Customer Channels


VALUE?

What problem do you see?

5. Business model validation = ask for help

Ask for helpGET OUT OF THE BUILDING

Customer Segments



Key Resources

Customer Channels

RevenuesCosts


GET TO VALUE PROPOSITION FIT

TEST YOUR PROPOSITION WITH CUSTOMERS

Validate with customers

Customer Segments



Key Resources

Customer Channels

RevenuesCosts


AND THE REST OF THE BUSINESS MODEL WILL FOLLOW

Build your network

1. Define your vision 2. Add people 3. Find your starter

business model 4. Get out of the

building 5. Ask for help

That’s how we’re going to get through this.

That’s how we’re going to get through this.

THE MONEY

WHY DID THE MARKETS BOUNCE?

FOR FUN

HOW WILL YOU MAKE MONEY?

YEAR ONE. JUST A HYPOTHESIS.

BALANCE SHEETS

CASH FLOW

INCOME STATEMENTS

Major Themes:

How business generates profits or losses

How to raise capital to start a company

How to monetize your business investment

Start a business:

First we need to determine how much money (capital) we need to run our business.

How much it costs to run our business on a monthly and yearly basis.

If we have less revenue then expenses, what does that mean?

Major Tools:

Balance Sheet

Income Statement

Cash Flow

Lemonade Inc.

We are going to need money and a legal corporate entity to do it under.

1,000,000 Shares of Stock for $1 each to us the founders

Sell another 500,000 Shares of Stock to an investor.

Lemonade Inc. Capitalization Table

You $1,000,000 (67%)

Investor $500,000 (33%)

____________________________________________

Company worth $1,500,000 (100%)

Lemonade Inc. Balance SheetASSETS Cash 500,000 you’ve raised

Fixed Assets 0

Inventory 0 Goodwill 1,000,000 your $1 MM idea

Total Assets 1,500,000

LIABILITIES

Debt 0

Total Liabilities 0

Shareholder’s Equity 1,500,000

Per Share $1

Lemonade Inc. Fixed AssetsTables and chairs Kitchen EquipmentComputers/Cash RegistersSignsAcquiring all these items cost us $50,000

ASSETS Cash 450,000

Fixed Assets 50,000 deduct from the cash

Inventory 0 Goodwill 1,000,000


LIABILITIES

Debt 0

Total Liabilities 0


Per Share $1

Lemonade Inc. Balance Sheet

WaterLemonsSugar CupsNapkinsContainers (to hold lemonade) We project we will sell 800 cups a day. The inventory above costs us $2.00 per cup.

800 cups X 30 days X $2 a cup = $48,000

Lemonade Inc. Inventory (Cost of Good Sold)

Lemonade Inc. Balance SheetASSETS Cash 402,000

Fixed Assets 50,000

Inventory 48,000 deduct from cash Goodwill 1,000,000


LIABILITIES

Debt 0

Total Liabilities 0


Per Share $1

We sell 800 cups a day for $4.50 a cup.

800 cups X 30 days X $4.50 a cup = $108,000

Lemonade Inc. OPEN FOR BUSINESS!!

THIS STRATEGY = WHAT COMPANY?

Lemonade Inc. Income StatementREVENUE

Cups sold per month 24,000

Price per cup $4.50

Revenue $108,000

UNIT ECONOMICS - LET’S FIGURE OUT HOW MUCH PER NEW CUP SOLD

Lemonade Inc. Income StatementREVENUE


Price per cup $4.50

Revenue $108,000

EXPENSES

COGS $48,000

Labor $COST OF GOODS

SOLD

Open 7 days a week, 8 hours a day8 hours x 7 days a week x 4 weeks= 224 hrs per position We pay, on average, $30.00 per hour per person. This includes health insurance, paid time off, retirement account contribution etc.

We need 5 people at all times to properly run the business.

224 hours x $30.00/hrs x 5 people = $33,600

Lemonade Inc. Labor

Lemonade Inc. Income Statement Month 1REVENUE


Price per cup $4.50

GROSS REVENUE $108,000

EXPENSES

COGS $48,000

Labor/Benefits $33,600

Marketing $10,000

Rent $10,000

Other $2,500

EBIT $3,900

Tax $1,365

NET INCOME $2,535

Gross Revenue $108,000 = 1.88%Net Income $2,035

Lemonade Inc. First Month Profit Margin

HOW ARE WE DOING?

Lemonade Inc. With $500k investment

You $1,000,000 (67%)

Investor $500,000 (33%)

____________________________________________

Company worth $1,500,000 (100%)


Fixed Assets 50,000

Inventory 48,000 Goodwill 1,000,000


LIABILITIES

Debt 0

Total Liabilities 0


Per Share 1

STILL HAVE 402K IN THE BANK

Lemonade Inc.

You $200,000 (62.5%)

Investor $120,000 (37.5%)

____________________________________________

Company worth $320,000 (100%)

WHAT IF WE RAISED LESS?


Fixed Assets 0

Inventory 0 Goodwill 200,000

Total Assets 320,000

LIABILITIES

Debt 0

Total Liabilities 0

Shareholder’s Equity 320,000

Per Share $1

WE’D HAVE A VERY DIFFERENT BALANCE

SHEET


Fixed Assets 50,000

Inventory 48,000 Goodwill 200,000

Total Assets 320,000

LIABILITIES

Debt 0

Total Liabilities 0

Shareholder’s Equity 320,000

Per Share $1

RUNNING LEAN. TOO LEAN?


Fixed Assets 50,000



LIABILITIES

Debt 0

Total Liabilities 0


Per Share 1

LET’S GO BACK TO OUR HIGHER CAPITALIZED

STRUCTURE


Fixed Assets 50,000



LIABILITIES

Debt 0

Total Liabilities 0


Per Share $1

Costs about $100k to start a new store

LET’S ADD GROWTH

Lemonade Inc. Growth Assumptions

Model out:

Open 1 new store a yearIncrease price by 15 cents a year

LOOK FOR STARBUCKS GROWTH ASSUMPTIONS

Lemonade Inc. Pro Forma Income StatementYear 1 2 3 4 5

REVENUECups sold per year 288,000 576,000 864,000 1,152,000 1,440,000Price per cup 4.50 4.65 4.80 4.95 5.10GROSS REVENUE 1,296,000 2,678,400 4,147,200 5,702,400 7,344,000

EXPENSESCOGS 576,000 1,152,000 1,728,000 2,304,000 2,880,000Labor/Benefits 403,200 806,400 1,209,600 1,612,800 2,016,000Marketing 120,000 240,000 360,000 480,000 600,000Rent 120,000 240,000 360,000 480,000 600,000Other 30,000 60,000 90,000 120,000 150,000EBIT 46,800 180,000 399,600 705,600 1,098,000EBIT Margin 3.61% 6.72% 9.64% 12.37% 14.95%

Tax 16,380 63,000 139,860 246,960 384,300NET INCOME 30,420 117,000 259,740 458,640 713,700Margin 2.35% 4.37% 6.26% 8.04% 9.72%

Lemonade Inc. Balance Sheet as of Dec 31stYear 1 2 3 4 5

ASSETS Cash 432,420 451,420 613,160 973,800 1,589,500 Fixed Assets 50,000 100,000 150,000 200,000 250,000 Inventory 48,000 96,000 144,000 192,000 240,000 Goodwill 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000Total Assets 1,530,420 1,647,420 1,907,160 2,365,800 3,079,500

LIABILITIES Debt 0 0 0 0 0Total Liabilities 0 0 0 0 0

Shareholder’s Equity 1,530,420 1,647,420 1,907,160 2,365,800 3,079,500Per Share 1.02 1.10 1.27 1.58 2.05

BY DOUBLING CASH YOU’VE DOUBLED SHAREHOLDER’S EQUITY

Lemonade Inc. Cash FlowYear 1 2 3 4 5

Cash Flow for OperationsNet Income 30,420 117,000 259,740 458,640 713,700

Cash Flow from InvestingCapital Expenditures 50,000 50,000 50,000 50,000 50,000

Cash Flow from FinancingMoney Borrowed (Debt) 0 0 0 0 0Dividends Paid 0 0 0 0 0New Shares Issued 0 0 0 0 0

Beginning Cash 0 -19,580 47,420 257,160 665,800Change in cash -19,580 67,000 209,740 408,640 663,700Ending Cash -19,580 47,420 257,160 665,800 1,329,500

Lemonade Inc. Measuring Growth

5th Year Earnings Yield - 47.58% returnAs of the 5th Year, the business is earning $713,000 on $1,500,000 invested.


Return on Invested Capital - 105% returnAs of the 5th Year, the business is earning $1,579,600 on $1,500,000 invested.


Earnings Growth - 14.99% per yearGrew from $1.02 a share to $2.05 a share


Accelerating Profitability

Valuation

Twitter:700,210,000 Shares X 17.49 = $12.25 Billion

Valuation

Twitter:700,210,000 Shares X 17.49 = $12.25 Billion

Lemonade Inc:1,500,000 Shares X 1.00 = $1,500,000

Pro Forma for Your Business!

Income statement

Balance sheet

Cash Flow

Major Tools:

Balance Sheet

Income Statement

Cash Flow

Lemonade Inc.

We are going to need money and a legal corporate entity to do it under.

1,000,000 Shares of Stock for $1 each

Sell another 500,000 Shares of Stock to an investor.

Lemonade Inc.

You $1,000,000 (67%)

Investor $500,000 (33%)

____________________________________________

Company worth $1,500,000 (100%)


Fixed Assets 0

Inventory 0 Goodwill 1,000,000


LIABILITIES

Debt 0

Total Liabilities 0


Per Share $1

NEXT TIME

Start a business:

First we need to determine how much money (capital) we need to run our business.

How much it costs to run our business on a monthly and yearly basis.

If we have less revenue then expenses, what does that mean?

Business 101.1 class 9 NYU ITP

Education

Transcript of Business 101.1 class 9 NYU ITP