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ENT 411 Review

What's important?

  • Mission, vision, values - what are mine? How do I live them through my business?
  • Stakeholder engagement - what do I want my business to mean to my stakeholders?
  • Employees
  • Customers
  • Community
  • Vendors

Foundations

Define the Value

Effective Value Propositions with value chains are complex. They must contain a demand driver and a sustainability model.

Value Definition

Demand Driver

Demand Driver

This is your offense. Your business must have a unique offering that is difficult to replicate.

Deliberately choosing a specific set of activities and deliberately NOT choosing other activities that deliver a unique mix of value with a clearly defined end user in mind

That end user has specific needs and wants that the business can meet profitably (sustainably) and uniquely with a difficulty for others to imitate

Tailored Value Chain

Sustainability in Action

Strategy and competitive advantage lies in activities - either what you perform or how you perform them differently

This strategy defines what you do to deliver your value - how is it different than the competition? How is it sustainable?

Lean Canvas

Engineer the Value Prop

  • Uncover the business model through target customers

Branding

Beyond just a memorable logo, good branding:

  • Increases the value of a company
  • Provides employees with direction and motivation
  • Makes acquiring new customers easier

A brand represents the sum of people's perception of a company's customer service, reputation, advertising and logo. It is the embodiment of the company value prop communicated through marketing channels in the brand voice.

Branding

Forecasting Highlights

  • 80% of forecasting time should be spent on the revenue side
  • Assumptions should be tied to the marketing plan - price, product promotion and place

Forecasting and Fundraising

Fundraising

Financing the Venture

  • Equity Financing -Money raised by a company in exchange for company ownership.
  • No interest is paid in this scenario. Equity investors can be anyone from friends and family to Venture capitalists or angel investors.
  • Debt Financing - borrowing money that must be repaid with interest over a period of time.
  • No company ownership is diluted in this scenario. Debt financing can be secured from banks, savings and loans, credit unions and small business entities supported by state and local governments.
  • Bootstrapping - self-funding through investments and savings

Importance of Assumptions and What-if's

  • Assumptions for the backbone of your modeling. If your assumptions don't match the real business outcomes than your forecast will be incorrect.
  • Assumptions are also analyzed by banks, investors, and other stakeholders for their plausibility
  • What if scenarios are critical management tools. They allow you to create ranges for performance and develop effective marketing programs to drive the business offense.
  • Your "what if" scenarios should include a worst case, a best case and a most likely scenario

Financial Management

Financial Management

Financial statements and reporting help inform the business owner of the current status of the business as well as provide indicators for risk and opportunity.

P&L

P&L Overview

P&L or Income Statement shows the profitability of a company during the time interval specified in the heading. It does not show cash receipts or cash disbursements...

  • Revenue
  • COGS
  • Direct Expenses
  • Non-Operating Income/Expenses
  • Net Income (Loss)

Important Metrics:

Gross Profit: Revenue - COGS

GP %: Gross Profit/Total Revenue

Net income: Total Revenue - Total Expenses

Return on Sales %: Net Income/Total Revenues

Balance Sheet

Balance Sheet Overview

Balance Sheet is the “Snapshot” of a company’s financial position at a given moment

  • Balance Sheet reports the amount of a company’s
  • Assets – Current assets/Long-term assets
  • Liabilities – Current Liabilities/Long-term liabilities
  • Stockholders’ (or owner’s) equity – Common stock / Retained earnings
  • Equation: Assets = Liabilities + Shareholders’ Equity

Cash Flows

Cash Flows Overview

Mantra: Remember the Bakery!

The Cash Flow statement reports the cash generated and the cash used during a specified time.

Math Class

Math Class Review aka Black Wednesday

  • Break-even analysis: Profit = (P x Q) - (V x Q) - F (Set P = 0 and solve for Q)
  • Manufacturing forecasting: Revenue = Price x Quantity
  • What is a limiting factor? How do we solve for it?
  • Gross Margin Calculations
  • Service Industry Forecasting
  • Wages Expense focus - WHY?
  • Time out of Cash - what does this mean?

Exit Strategy Planning

As early as the planning stages, business owners should consider their ideal exit strategies

Exit Strategy

Valuation

Ways to Value a Business

  • Fair Market Value
  • Going Concern
  • Highest and Best Use
  • Future Benefits
  • Substitutes and Alternatives
  • Discounted Cash Flow Analysis
  • Objectivity

* Another reason why you want and need a good accountant for your business.

Exit Planning

Ways to Exit a Venture

  • Transfer
  • IPO, Merger, Strategic Alliance, Employee Stock Ownership Plan (ESOP)
  • Bankruptcy
  • Chapter 7 or Chapter 11

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