Chapter 9

Question 1

Startup resource requirements

Answer 1

1) people (founding team, employees)
2) physical assets (equipment, inventory)
3) financial resources (cash, equity, debt)
4) intellectual resources (brand, patents, copyrights)

Question 2

value proposition

Answer 2

what activities are associated with creating the solution to meet the needs of the customer?

Question 3

distribution channels

Answer 3

what activities do we have to do because of our channel partners?

Question 4

customer relationships

Answer 4

what activities do ewe have to undertake to maintain good relationships with our customers?

Question 5

revenue generation

Answer 5

what activities do we have to do to produce sufficient revenue?

Question 6

process map

Answer 6

flow chart of business activities; ID human, physical, and capital resources required

Question 7

value chain

Answer 7

position the startup; figure distribution, pricing, and markups

Question 8

timeline to launch

Answer 8

identify milestones and triggers for change

Question 9

financial assumptions

Answer 9

revenues, expenses, startup costs

Question 10

key financial metrics

Answer 10

common and unique to the business; direct cash flow statement

Question 11

startup cash requirements

Answer 11

what is needed to meet resource requirements

Question 12

deal-killer risks

Answer 12

risks that might prevent the business from even launching in the firs place

Question 13

path-dependent risks

Answer 13

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

Question 14

low-hanging fruit with high ROI

Answer 14

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

Question 15

launch strategy goals

Answer 15

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

Question 16

common metrics that all startups use

Answer 16

sales forecast
headcount
expenses (fixed and variable)
break-even cash flow

Question 17

gross margin

Answer 17

used by product business; gross profit/gross sales

Question 18

inventory turns

Answer 18

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

Question 19

occupancy

Answer 19

used by hotels, apartments, commercial; if vacancy rates reach a particular level, the business is not sustainable

Question 20

qualified leads

Answer 20

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

Question 21

customer acquisition costs (CAC)

Answer 21

how much did it cost the startup to acquire customers?; ex: advertising/promotional expense

Question 22

average order size, time to reorder, and lifetime value per customer

Answer 22

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

Question 23

revenues per salesperson and time to revenue for direct sales

Answer 23

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

Question 24

acquisition, retention, revenue, viral coefficient

Answer 24

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

Question 25

contribution margin

Answer 25

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)

Question 26

monthly burn rate

Answer 26

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

Question 27

triangulate demand

Answer 27

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

Question 28

revenue

Answer 28

accounting term for the business’ sources of income (products, services, subscriptions)

Question 29

economies of scale

Answer 29

cost of producing a product is tied to how many products you can sell

Question 30

increase in sales is influenced by

Answer 30

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

Question 31

startup expenses

Answer 31

rent/employee per month, initial per-employee equipment cost, annual payroll tax, monthly travel costs, monthly telephone costs per field employee, annual accounting costs

Question 32

trigger

Answer 32

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)