Business Model Flashcards
What is a business model?
A model that describes how a company captures, creates and delivers value for the firm and for the customer
What are the four types of business model frameworks?
• Component focused o Business model canvas • Relationship/transaction focused o Business model blocks • Decision and consequence focused • Financially focused
What elements are used in the business model canvas?
- Key Activities
- Key Partners
- Channels
- Customer Relationships
- Cost Structure
- Revenue Streams
- Key Resources
- Customer Segments
- Value Proposition
What is value proposition?
A value proposition describes in detail what benefits can be expect from the delivered product or services
Why is designing a value proposition important?
- One of the top reasons for failure in startups is that there is no market need, i.e. a company delivers a service that no one needs.
- The need, demand and what benefits can be expected depends on the customer
Which values can be created from a value proposition design point of view?
This depends on who you ask, and if you see if from a gain or pain point of view • Economic value • Utilitarian value • Social value • Experiential value • Moral value
What are three top reasons for start up failures?
- No market need
- Ran out of cash
- Not the right team
- Get outcompeted
- Pricing/cost issues
- User un-friendly product
- Product without a business model
What is a customer profile?
Describes a specific customer or customer segment and some of its characteristics
What are different ways to understand your customer?
- Use the internet
- Individual interview
- Focus group
- Ethnographic study
- Customer survey
- Testing
How can a customer profile be described?
Through customer jobs, customer pains and gains
What is the important when understanding if there is a market need?
To understand the customer segment in detail, and what the customer wants
What are some reasons for startup failure?
- No market need
- Ran out of cash
- No right team
- Get outcompeted
- Pricing/cost issues
- User un-friendly product
- Product without a business model
What does a value map describe?
A value map describes value propositions as product and services, pain relivers and gain creators
What is the essence of value proposition design?
To find the right fit; when customers get excited about your value proposition which happens when you address important jobs, alleviate extreme pains and create essential gains that customer care about.
What is mentioned as the main driver for customer development within startups?
• There is no startup that has a business plan that survives the first contact with customer
What is a MVP?
A minimum viable product (MVP) is a product with just enough features to satisfy the early customer and provide feedback to future development
What are the three main financial statements, describe them breifly.
• Balance Sheet
o A statement that describes what a company has, what it owes and its worth.
• Income Statement
o A statement with an estimation of how the company will perform over a period of time
• Cash Flow Statement
o A statement that tracks the inflow and out flow of cash sepnd in a period of time.
Which of the financial statements are fiction and real?
• Balance and income statements are fiction, the cash flow statement is a reality that should show the company’s performance and viability.
What is the customer development method?
• The Customer development methodology is used by testing and developing new hypothesizes about a business model
What is depreciation and what is it used for?
- The value of an asset that depreciates over time and matches cost to revenue over time. Example: a product will reduce in value over time when used.
- A method of reallocating the cost of a tangible assets over its useful life span of it being in motion.
- Businesses depreciate long-term asses for both accounting and tax purposes.
- There are several types of depreciation expense and different formulas for determining the book value of an asset.
What is important to know about market types?
- The chosen market you are in should guide you in what to focus on
- Either, enter an existing market, re-segmented market an existing market, cloning another market or creating a completely new market
- Depending on chosen market type; there is a difference between the customers, product performance, competition and risk.
What are the different types of markets types?
• Bringing a new product into an existing market
• Bringing a new product into a new market
• Bringing a new product into an existing market
o Re-segment market as a low-cost entrant
o Re-segment market as a niche entrant
• Cloning a business model that successful in another country.
What important to know about market sizing?
- There is a clear difference between the size of a theorical total market, the addressable market, the serviceable market and target market.
- A top-down market approach gives a first estimate while the bottom-up serviceable market size assessment provides a reality check
- There is often data on existing stable markets, however estimating the size of a new market or markets in growth/decline can be challenging.
Which types of markets are there?
Total market potential (TMP)
• The potential sales values of a particular product or service within a specific target segment over a specified time frame
Total addressable market (TAM)
• The potential sales values of a particular product or service within a specific target segment over a specified time frame, taking into consideration the addressable demand.
Serviceable available market (SAM)
• The potential sales values of a particular product or service within a specific target segment over a specified time frame, taking into consideration the addressable demand for a specific business model.
Target Market
• The potential sales values of a particular product or service within a specific target segment over a specified time frame, taking into consideration the part of the SAM that is being actively targeted by marketing
• Most realistic assessment of the short-term available opportunity, but the input data may be difficult to acquire.
Describe the common business models and their degree of scalability
- A consulting/expertise service– low scalability, difficult to scale a persons time and effort.
- A commodity service –
- A physical product
- A software/digital product - high scalability
What is indicates a business model with high scalability?
This often indicates that the business is not as complex, which in turn means lower entry barriers and more competition, often resulting in highly capital-intensive battle for leadership and existence.
What is unique with example Facebooks, YouTube, Airbnbs business model?
They have had a unique opportunity to where they have had strong networks effects involved and a highly scalable business model which have resulted in a “winner-takes it all” solution for their businesses.
What is the key point with competitive advantage?
As a business, you aim for monopoly and the advantage over competition as perfect competitors erodes all margins
In which ways can a business model be analyzed?
- SWOT
* Resourced based view
Why are metrics important?
- Metrics are used to help businesses focus their people resources on what’s important
- Which metric to use, track and analyse depends on the chosen business model. There are some specific metrics for specific business models.
What are key points in valuation of a business?
- To arrive at a valuation one must both assess the numbers and the story that gives the number significance and meaning.
- There are many valuation methods however there are no precise valuation and no unbiased valuations
- The most used valuations methods, such as relative valuation and DCF valuation, requires relatively basic computation. The difficult arises for making assumptions about the future.
