Monetizing the Business Model MBA Lite
Dan Quigg, a technology executive with 25 years of experience, shares insights on building enterprise value and entering beachhead markets. The focus is on the business model framework and core strategies for profit. Learn about the importance of the core in delivering customer value effectively and the key decisions entrepreneurs need to make. Explore growth, scalability, and revenue strategies for building enterprise value.
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Presentation Transcript
MONETIZING THE BUSINESS MODEL MBA LITE FEBRUARY 17, 2014
DAN QUIGG BIO 25 Years Technology Executive Founder & CEO, Public Insight Corporation President & CEO, RIS Logic acquired by Merge Healthcare Founder & CEO, OmniVista acquired by Best Software General Manager, Best Analytics (acquired by Sage) KPMG Small Systems Co-Founder CEO - Public Insight Corporation Developers of 360-Public Goal of transforming public data into insight Kent State University Adjunct Professor of Entrepreneurship Awards and Groups Ernst & Young Entrepreneur of the Year Finalist Smart Magazine Rising Star Case Western Reserve Inaugural Leadership Award Leadership Cleveland Class of 2013 Follower of Jesus Christ
BUSINESS MODEL FRAMEWORK Our Focus Source: Business Model Institute
GOAL: BUILD ENTERPRISE VALUE Value of an Organization Exit Value Functions: Growth Rate Recur Revenue Scalability Margins Risk Mkt Potential Entrepreneur Decisions: Capital vs. Bootstrapping Acceptable Cash Burn Founder Salaries Company Products Service Co. Software Co. 100,000 Base Year Growth Rates: Year 2 Year 3 Year 4 Year 5 100,000 300% 100% 70% 50% 500% 300% 200% 100% 2,040,000 2,040,000 14,400,000 57,600,000 Liquidation: Revenue Exit Value Leverage 1 4 28.24 Sold To Capital Sale Amount Exit Timeline 2 years OmniVista Best Software $85k $7 Million Active Planner Advanced Allocations Financial Reporter Premier Budgeting RIS Logic RIS Logic Merge Healthcare $2.1 Million $16-24 Million 2 years
BEACHHEAD MARKET ENTRY Paying Customers Not Fun With Spreadsheets Innovative Not Me Too Primary, then Secondary Go For the Beachhead!
THE CORE Adjacency Adjacency Adjacency Adjacency Core Adjacency Adjacency Zook Profit from the Core
WHATISA CORE? The Core is something that allows you to deliver the benefits your customers value with much greater effectiveness than any other competitor.* What it is Not? IP First mover advantage Locking up suppliers Pivoting: Typically a change in core Average successful pivots 1.8 Not a change in primary market * Disciplined Entrepreneurship
SOURCESOFDIFFERENTIATION Portfolio management and finance M&A, JVs, and partnering BU strategy and driving priorities HR Regulatory management management and culture Production and operations Development and innovation Supply chain and logistics Customer relationships Go-to-market Tied customer network Tangible assets Technology and IP Scale Brand Must have at least three Zook Repeatabillity
MINIMUM VIABLE BUSINESS PRODUCT (MVBP) 1. Customer Gets Value 2. Customer Pays for Value 3. Product is Sufficient to Start the Feedback Loop 4. Iterate Towards a Better Product
ECONOMIC ECOSYSTEM Source: Wide Lens
EXAMPLE 1 2 Free Segment Providers Consumers Those Who Care K-12 School Districts Parents and Students Media Service Centers Consultants Unions State K-12 Trade Associations Consultants Libraries Non-Profits Libraries Trade Associations Consultants State Media Planning Agencies Libraries Economic Develop. Higher Education Colleges and Universities Parents Students Health Care Providers Insurance Companies Patients Government State and Local Entities Constituents Business Business/Labor Mkts General Public
PRICING FRAMEWORK Goal of Lifetime Value Costs are Irrelevant Understand Value Pay Attention to Decision Process Understand Price Alternatives Different Types Will Pay Different Prices Be Flexible for Early Adopters and Lighthouse Customers It is Always Easier to Drop the Price Than Raise it
UNDERSTAND COSTSOF CUSTOMER ACQUISITION Time Horizons Year 1 Years 2 and 3 Years 4 and 5 Source: Disciplined Entrepreneur
METRIC DRIVEN REVENUE FORECASTING Gross User Licenses Cumulative User Licenses Average Annual Subscription Price New Cash Subscriptions Renewal Percentage Renewal Subscribers Renewal Cash Subscription Cumulative Subscriptions New Subscription Revenue Previous Years Revenue Recognition Monthly Revenue Consulting Estimate Consulting Revenues Subscriber Cancellations Cumulative Subscriber Cancellations Active Subscribers 2,000 5 5 10 15 400 4,000 85% - - 6,000 500 15 30 400 6,000 85% - - 12,000 1,000 10,000 25 55 400 400 85% - - 2,000 167 85% - - 22,000 1,833 167 0% - - - 500 0% - - - 15 1,000 1,833 0% 0% - - - - - - 5 30 55
CASH FLOW PLANNING Cash Flow Beginning Cash Jan-12 (77,294) Feb-12 (108,711) Mar-12 (143,715) Apr-12 (195,422) May-12 (250,552) Jun-12 (279,676) Jul-12 (307,216) Aug-12 (329,041) Sep-12 (339,156) Oct-12 (344,379) Nov-12 (344,567) Dec-12 (340,341) Inflows: Existing Member Fees New Member Fees Renewal Fees Referral Fees Direct Service Fees - Contingency Direct Service Fees - Project 36,660 860 12,000 2,100 48,515 8,565 25,000 14,400 3,300 46,723 2,423 25,000 25,000 2,450 16,800 4,200 48,450 - 19,200 5,100 60,035 7,285 25,000 21,600 6,600 61,703 3,703 25,000 37,500 6,400 24,000 8,100 76,000 - 37,500 9,375 8,150 24,000 9,300 88,325 - 37,500 9,375 10,000 26,400 10,200 93,475 - 37,500 9,375 12,000 28,800 11,100 98,775 - 37,500 9,375 14,050 31,200 11,700 103,825 - 37,500 9,375 16,625 33,600 13,575 110,675 - 25,000 - - - - - - - 300 850 1,600 3,450 4,800 9,600 900 Outflows: Salaries and Wages (Burdened) Operating Expenses Sourcing Office Advances/Earned 52,321 13,755 2,000 68,076 52,914 28,605 2,365 83,884 52,825 28,605 2,278 83,707 57,975 28,605 2,362 88,942 58,554 28,605 2,927 90,086 58,638 28,605 3,008 90,251 67,219 28,605 3,705 99,529 67,835 28,605 4,306 100,746 68,093 28,605 4,557 101,255 68,358 28,605 4,815 101,778 68,610 28,605 5,061 102,277 68,953 28,605 5,395 102,953 Net Operating Cash Generated (Used) (31,417) (35,370) (36,984) (40,492) (30,051) (28,548) (23,529) (12,421) (7,780) (3,003) 1,548 7,722 Capital Costs Other Capital Equipment Prepaid SO Marketing Fee Organization Costs Accounts Payable Reduction Community Web Site Sourcing Office Advance Reduction New Hire Capital Costs 15,000 (278) 14,722 15,000 (362) 14,638 (365) - (365) (927) - (927) (1,008) - (1,008) (1,705) - (1,705) (2,306) - (2,306) (2,557) - (2,557) (2,815) - (2,815) (2,678) - (2,678) - - - - - - Financing Loans From Related Parties Capital Contributions (31,417) (108,711) - (35,005) (143,715) - (51,707) (195,422) - (55,130) (250,552) - (29,124) (279,676) - (27,540) (307,216) - (21,824) (329,041) - (10,115) (339,156) - (344,379) - (344,567) - (340,341) - (332,619) - Net Cash Generated (Used) Ending Cash before Distributions (5,223) (188) 4,226 7,722 Distributions: Cash Distributions (108,711) - (143,715) - (195,422) - (250,552) - (279,676) - (307,216) - (329,041) - (339,156) - (344,379) - (344,567) - (340,341) - (332,619) - ENDING CASH
QUESTIONS CONTACT INFORMATION: Dan Quigg, CEO Dan.Quigg@publicinsightcorp.com Cell: 440-317-0117 561 Boston Mills Rd., Suite 500 Hudson, OH 44236 www.publicinsightcorp.com
