Technology Ventures: From Idea to EnterpriseChapter 16: Summary Summary How will a new venture...
-
Upload
david-fowler -
Category
Documents
-
view
222 -
download
2
Transcript of Technology Ventures: From Idea to EnterpriseChapter 16: Summary Summary How will a new venture...
Technology Ventures: From Idea to EnterpriseChapter 16: Summary
Summary
How will a new venture generate revenue and achieve positive cash flow?
The revenue and profit engines show how the firm will create powerful value for its customers and customers will enable the new firm to profit. Managing revenue growth is important. Also a firm needs a plan to harvest the benefits of its growing venture.
Profit is the product of labor plus capital multiplied by management. You can hire the first two. The last must be inspired.
Fost
Profit and HarvestProfit and Harvest
1616
*sales model – describing how to generate revenues from customers, then, determine cost model, and how to generate profits from its revenues.
Chapter 16: Table 16.1
Revenue Model: describes how the firm will generate revenues.
Five Revenue Models
Sales Product Model
Subscription (Member) Fee Model
Advertising Revenue Model
Transaction Fee Revenue Model
Affiliate Revenue Model
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
A firm’s revenues are its sales after deducting all returns, rebates, and discounts.
Models for generating revenues.
e.g.Visa, ebay
e.g. “Redirecting” to amazon
Technology Ventures: From Idea to OpportunityChapter 16
Cost Model: describes the factors that affect total firm costs
Four types of cost drivers
Fixed
Variable
Semivariable
Nonrecurring
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Chapter 16: Figure 16.1
Profit Model: the mechanism a firm uses to reap profits from its revenues.
The Value of A Product and Profit
Profit
Cost
Net Value Captured by the Customers
Value of Product to
the Customers
Profit and HarvestProfit and Harvest1616
Technology Ventures: From Idea to Enterprise
Profit is the net return after subtracting the costs from the revenues.
Must examine all activities on the
value chain.
Chapter 16: Figure 16.2
Business Model and Strategy
Plans
Resources and Competencies
Innovation
Operations and Processes
Products
Revenue Model
Revenues
Profit Model
Profits and Cash Flow
The Revenue and Profit* Flows from the Firm's Operations
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
* The revenue and profit engine.
The best conditions for profit occur when the perceived valued value of a product to a customer is high and the cost to produce the product is low.
The early losses of a successful startup turn profitable after a time T.
Profit and HarvestProfit and Harvest1616
Nine Types of Profit Models
Profit and HarvestProfit and Harvest1616
Where: PM = profit-to-sales ratioL = debt-to-equity ratioT = the ratio of total assets to sales.
If a start-up firm has no debt (L=0), we have
Chapter 16
)]1([
)1(
LPMT
LPM
S
S
Sustainable Growth
PMT
PM
S
S
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Chapter 16: Table 16.5
Incentives for Growth
•Attracting Capital for Market Expansion
•Attracting Capable Team Members
•Economies of Scale
•Development of a Reputation and Brand
•Growing Profitability and Financial Rewards for Owners and Employees
Profit and HarvestProfit and Harvest1616
Technology Ventures: From Idea to Enterprise
Chapter 16: Figure 16.6
Sales
Sales Growth
Rate (%)
Operating Profit Margin (%)
Volume
Economies of Scale
Operating Leverage
Price & Sales Mix
Operating Costs
Cost Efficiencies
Corporate Market Value
Investments
Investment Efficiencies
Incremental Investment Rate (%)
Causes Factors Drivers Market
Value Causes and Drivers of Market Value
Note: Operating Leverage =
ingmanufacturandtdevelopmenproductforCosts
MarginProfit
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Chapter 16: Harvest Plan
A harvest plan defines how and when the owners and investors will realize or attain an actual cash return on their investment.
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Five Methods of Harvesting The Wealth Created by a New Firm
•The Sale of the Firm to An Acquiring Firm
•The Sale of the Firm's Stock on A Public Market through An Initial Public Offering
•Issuance of Cash Dividends to the Owners and Investors
•The Sale of the Firm to the Managers and Employees
•Transfer the Firm through Gifts and Sales to Family Successors
Chapter 16: Table 16.7
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Chapter 16: Sunk Cost
Sunk Cost is a cost that has already been incurred and cannot be affected by any present or future decisions.
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Knowing when to stop or terminate…
e.g. Funds and time invested.
Chapter 16: Figure 16.7 – decision tree for sunk costs
A Decision Tree for the Sunk Cost Dilemma
Invest More
Time & Money
Continue
DecisionTotal Investmentin a New Venture which is failing to achieve positive cash flow Terminate
the Venture
Learn from the Experience and then consider new opportunities
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
A new firm with a powerful revenue and profit engine and a reputation for ethical dealings can achieve strong but manageable growth leading to a favorable harvest of the wealth for the owners.
Chapter 16: Principle
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Chapter 16: Exercise
A new fuel cell has been designed for use in hybrid vehicles. Select a revenue and profit model and determine an achievable sales growth rate for no debt and a low profit margin PM=0.15 when T=1
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Chapter 16: Venture Challenge
VENTURE CHALLENGE1) Describe the revenue model of your venture.
2)Describe the profit model of your venture
3)Using table 16.7, discuss your harvest plan.
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise
Chapter 16: DVD Video
DVD Video
“Reducing Company Costs: PayPal and SpaceX”
Elon Musk (SpaceX)
Profit and HarvestProfit and Harvest
1616
Technology Ventures: From Idea to Enterprise