Chapter 9 Flashcards
Startup resource requirements
1) people (founding team, employees)
2) physical assets (equipment, inventory)
3) financial resources (cash, equity, debt)
4) intellectual resources (brand, patents, copyrights)
value proposition
what activities are associated with creating the solution to meet the needs of the customer?
distribution channels
what activities do we have to do because of our channel partners?
customer relationships
what activities do ewe have to undertake to maintain good relationships with our customers?
revenue generation
what activities do we have to do to produce sufficient revenue?
process map
flow chart of business activities; ID human, physical, and capital resources required
value chain
position the startup; figure distribution, pricing, and markups
timeline to launch
identify milestones and triggers for change
financial assumptions
revenues, expenses, startup costs
key financial metrics
common and unique to the business; direct cash flow statement
startup cash requirements
what is needed to meet resource requirements
deal-killer risks
risks that might prevent the business from even launching in the firs place
path-dependent risks
risks that arise from a decision to take what turns out to be the wrong path; happens when a startup needs to hit several markets simultaneously
low-hanging fruit with high ROI
risks that are easy and cheap to resolve; important to take these on because left unmitigated, they could turn into deal killers or at a minimum waste time and money
launch strategy goals
1) to reflect the needs of our customers with respect to the solution, the price, and how it is delivered
2) to reach the best first customers– the ones who need their problem solved the most
3) to have in place the funding needed to reach positive cash flow
4) to reduse as much risk as possible
common metrics that all startups use
sales forecast
headcount
expenses (fixed and variable)
break-even cash flow
gross margin
used by product business; gross profit/gross sales
inventory turns
used by businesses that hold inventory; ex: retail; frequency with which inventory turns over provides important information about success of their marketing strategy and their product mix
occupancy
used by hotels, apartments, commercial; if vacancy rates reach a particular level, the business is not sustainable
qualified leads
used by internet businesses; designed to produce qualified leads, which are users that fit the image of a qualified buyer and who provide a certain level of activity and response to the company’s marketing campaigns
customer acquisition costs (CAC)
how much did it cost the startup to acquire customers?; ex: advertising/promotional expense
average order size, time to reorder, and lifetime value per customer
tracking what each customer spends, how often they spend, and what the potential lifetime value of the customer is; a startup with no customers can use market research on similar companies discounted to reflect startup’s inexperience
revenues per salesperson and time to revenue for direct sales
the amount of time it takes for a new salesperson to get up to speed and begin generating revenue that exceeds their costs and their portion of the contribution margin overhead
acquisition, retention, revenue, viral coefficient
for internet ventures;
viral coefficient= how many new users come to the site on referrals by existing users, used to track site growth, popularity, and level of engagement
x(invited friends) x y%(acceptance of conversion rate)
coefficient >1 = the site is growing; coefficient=1= the site is stagnant
contribution margin
found by subtracting variable costs from revenues and dividing the difference by revenues to yield a percentage; that percentage expresses how much money remains to pay overhead and make a profit after the costs of producing the product are considered; tells you how much room you have to make errors (small=not a lot of room)
monthly burn rate
how the startup uses its cash to cover its overhead before it generates a positive cash flow from operations; signals to investors whether the company can sustain itself and how quickly it will need another infusion of capital
triangulate demand
make sure to look at 1) historical analogy with similar products/services; 2) customer feedback, end-user and intermediary feedback; 3) the entrepreneur’s own perspective, gleaned from previous experience and from going into limited production or doing a test market
revenue
accounting term for the business’ sources of income (products, services, subscriptions)
economies of scale
cost of producing a product is tied to how many products you can sell
increase in sales is influenced by
growth rates in the market segment of the product/service; innovations offered that will make the product/service more attractive to the consumer, even at a higher price; technological innovations employed that enable the entrepreneur to produce the product or service at a lower cost than competitors, thus making it more accessible and enticing to the consumer
startup expenses
rent/employee per month, initial per-employee equipment cost, annual payroll tax, monthly travel costs, monthly telephone costs per field employee, annual accounting costs
trigger
lead time before milestone that indicate a change in the current revenue pattern (ex: acquiring a major customer was a trigger for an upswing in revenues)
