A MasterClass decoding the basics of scale-ready business model by Marketing and Business Development Leader. Tom Katsioulas is an Executive in Silicon Valley with more than 25 years experience, discusses the fundamentals and the mindset of a business that is set to create value. More: https://mindspark.gr/about/neurons/tom-katsioulas/

1. From Idea to Scalable Business Plan
Lifestyle vs. Scalable Business
1
Tom Katsioulas, Technology Executive
https://www.linkedin.com/in/tomkatsioulas/

2. Idea to Business Plan Requires a Lot of Work
• You have unlimited potential
• Get over your fixed mindset
• Leverage experience of others
• You are on your way to success
SCALING
How to keep
growing?
PLANNING
Cost & time
to deliver?
STARTUP
Team & cash
needed?
BUSINESS
GTM & Sales
Strategy?
IDEA
Problem and
market need
RESEARCH
How others
serve market?
VALUE PROP
Who pay for
our solutions
2

3. Ingredients for Success
?
There is no substitute for EXPERIENCE
• We share & absorb data
• We process information
• We gain knowledge
• We grow and produce
3

4. 4

5. What is Your Big Idea?
• What is your motivation?
• You want to change the world?
• You want to make money?
• Where can you get advice?
You are responsible for the BIG IDEA that will lead to SUCCESS
5

6. What is a “Lifestyle” Company?
• Has limited growth opportunity
• May be highly profitable
• Requires a very small team
• Most likely requires relatively small initial investment
• Is NOT a candidate for venture capital funding
• Example:
• In three years a business can grow to $3M annual revenue with 30% operating
margins. It can maintain this revenue and profitability indefinitely.
It is an excellent choice for an individual or small team
6

7. Consulting (services) vs. Products
• Product companies BUILD things they can SELL
• Emphasize how their standard products are customizable
• Require initial up front investment to build product
• Consulting companies SELL things they can BUILD
• Emphasize how their custom services are standard (repeatable, practices)
• Get paid up front (as much as 50%) for their services
In either case you must find CUSTOMERS willing to pay for value
7

8. About Your Business Plan
• Your plan is not a document or a presentation
• It is what you actually intend to do to succeed
• It must first come to life in your mind’s eye
• You live and breath your plan every moment of your life
• It requires exceptional levels of commitment to develop it
• Your plan IS your plan, it’s either fundable or not
• Do not just create a “plan for investors”
• Do not ask “what do VC’s want to see?”
• Once you have developed your plan
• You can create the document or presentation
• Ok, it is an iterative process ;)
8

9. The Financial Side of Your Plan
• You do not need to be a finance genius
• You can retain finance experts
• To cast your plan in financial terms
• To “sanity check” your plan
• You need to be able to read and understand financial statements:
• Cash Flow , Income, Balance Sheet
• For venture funded companies you also need
• Capitalization table
• And estimate % of revenue when you reach profitability
• G&A, R&D, Marketing, Sales, etc.
9

10. About Your Funding Strategy
• If you are building a “lifestyle” company do not waste your time seeking
venture capital funding!
• Government and EU funding can be “fool’s gold”
• It will only delay the inevitable, if your idea/plan is bad!
• Or delay your time to market dealing with bureaucracy
• You have two objectives:
• Achieve sustainable, profitable growth
• Fund your way to profitability and beyond
• Understand how to work with VC’s
• Different management styles based on their background
10

11. About Executing Your Plan
• Think globally, be prepared to travel
• Always act locally
• Customers do not care about time difference or your national holidays
• You are competing globally
• Know your competition
• Living in Greece an excuse for anything
• Listen to your investors and expert advisors
• You have the idea, they have the experience
• If you cannot hire expert advisors then try to rent them!
11

12. Your Business Plan Summary
• Market: Which market you participate? How big?
• Solution: Which need you address and which problem you solve?
• Capability: What is the product, service, or technology?
• Value: What is your value proposition to whom?
• Business Model: How do you make money?
• Team: What’s the experience and expertise needed?
12

13. Your Elevator Pitch
• What do you do? How long you’ve been in business?
• How much money you’ve raised and from whom?
• What is the company or business stage?
– Development, validation, deployment, biz dev, sales
– Revenues, marketing, profitability, market expansion
• What are some key milestones reached?
– Number of Employees
– Bookings and Revenues
– Major Customer Traction
– Number of Users, Installations, Contacts, etc
13

14. Market Drivers
• Identify market drivers that create opportunity
• What are the past and present trends?
• What are the discontinuities, gaps or shifts?
• What are the market needs that enable growth?
• How do you fit in the bigger market picture?
– Business, product, technology, or solution
14

15. Market Landscape
• How does the industry deal with market trends?
• Who are the main suppliers and buyers of goods?
• What are some key issues faced by the buyers?
– Business, operating, or technical Issues
• What are the strategies of the leading suppliers?
• How do you add value in the food chain and ecosystem?
15

16. Customer Pain
• How big is the problem you’re addressing?
– Pain points you are solving (quantify them)
• Which customers feel pain and how many?
– Companies, functional teams, users, consumers
• How do customers deal with the problem?
– Non scalable solutions, workarounds, overhead, labor, etc.
• What solutions are being offered by others?
– Vitamins are good, pain killers are better
16

17. Market Size
• What is the total available market size and growth rate?
– Typically reported by research firms (or else you estimate it)
– This or a subset of it may be your Total Available Market (TAM)
• What is your bottom-up serviceable market estimate (SAM)?
– Focus on what matters (users, usage, parts, cost, value)
– Average transaction (or ASP per part) = $X
– Y customers (or volume) in our market
– Market Size = $X * Y (BIG number shown to investors)
• How fast is the market growing and why? (Examples)
• Hardware, Software, Internet, e-commerce, Smartphones, Consumer IoT
– Digitalization, Industry 4.0, Industrial IoT, Analytics, Machine Learning, etc..
17

18. Segmentation
• Subdivide TAM into different segments you may target
– Build pie charts with distinct characteristics for each segment
– Analyze and prioritize the segments you will target
• Pick a niche segment you can dominate before expanding
– Explain why you chose this segment and how much is worth
– Use filters to calculate your Serviceable Available Market (SAM)
• Identify the barriers to entry that you will need to overcome
– Loyalty to leader, Inertia, legacy infrastructure, resistance
– Who will value your solution and who is threatened?
18

19. Solution to Pain
• What is your solution offering to the problem?
– Technology, product, service, or a mix?
– And if a mix, how to make repeatable and sustainable?
• Which pain do you address that others don’t?
– Do you supply vitamin, aspirin, or antibiotics? (relates to value)
– Is it must or nice to have and under which conditions?
• Focus on the “what and why” (the value) and not the “how”
– Why are you better and different than existing alternatives?
– What is the economic benefit of your solution to customer?
• Revenue, operating cost, reduced risk, market share, other?
19

20. Enabling Capability
• Explain the unique capability or technology the solution
• What is the unique mix that produces the benefits?
• If it’s technology how does it work in laymen’s terms?
• What makes it disruptive, scalable and defensible?
• What is the secret sauce and how it leapfrogs others?
• How it compares to state-of-the-art? Is it protected?
• What are its use models and its expected lifecycle?
• What features you can add on top for different applications
• Products are more cyclical, platforms are more scalable
20

21. Value Proposition Types
• Operating Value
• Enable the Process
• Operating Cost
• Time-to-Market (TTM)
• Application Value
• Cost (Size)
• Performance
• Low Power
• Reliability
• Quality
• Economic
• Measurable
• Scalable
• Competitive
• Profitable
Cheap
Quick
Able
Cheap
Fast
Good
Trade-offs
Desirability
Features+
21

22. Value Proposition Mix
• Quantifiable: Good, Fast and Cheap (pick two):
• If you want Good and Fast it will not be Cheap
• If you want Good and Cheap it will not be Fast
• If you want Fast and Cheap it will not be Good
• Can you make all three come true (e.g. Dell, Apple)?
• Good – quality on par or better than competitors
• Fast – Custom PCs delivered in days, iPod songs instantly
• Cheap – equal to or lower than any competition
• Intangible: Desirability (depends on target audience)
• More nebulous, harder to quantify and often very personal
• Examples: Easy to use, easy to integrate, interoperable, elegant, slick…
Margins
Revenue
Functions
CEO
Features
Tech
Features
Product
GMs
VPs
Employees
Managers
Directors
Benefits
Functions
Personal
Factors
Perspectives on View of Value
22

23. Competition
• Who are the direct, indirect and adjacent competitors?
• What are their strengths & weaknesses? Which stage are they?
• Where do you fit it? Is there room for “coopetition”?
• How are you better, or have an advantage, or are different?
• Compare based on customer decision making criteria
• Diagram or matrix what you have that they don’t
• If they’re behind what prevents them from catching up?
• How will you differentiate and sustain your advantage?
• Simple vs. complex; Open vs. closed; User vs. enterprise
• Cost, speed, power, price, adaptability, customization, ease-of-use
23

24. Customers
• Who is the target audience and characteristics
• Company, functional team, single user, buyer, and beneficiary
• If your product is used by single users what are their attributes
• Decision makers, influencers and budget controllers
• What is the decision making process to buy?
• Org structure, Purchasing/Eng link, qualification criteria
• Process to prove value, budget and procurement factors
• Loyalty to existing supplier or volume discounts
• Explain how customers buy, what they’ll pay and why
• If you have customers describe the key reasons they bought
• Keep track of engagements and gather data why they buy or not
• If not, describe how you will make your value prop compelling
• Show traction (logos) and explain what value they received
24

25. Business Model
• How do you make money and maximize profit?
• What’s the time & cost to acquire customer and what’s the ROI?
• How do you maximize your leverage in the ecosystem?
• What’s your algorithm to break even and become profitable?
• What is the revenue model and from which sources?
• Direct: subscription, selling parts, licensing, services, etc.
• Indirect: VAR, distributor, channel partner (% or mark-up)
• Web based: Download & pay later, cents per click, SaaS, etc.
• Describe 2-3 revenue streams and prioritize them
• Show assumptions & metrics on Size, Frequency, Ramp, Growth
• Cite proof of market and customer behavior to show viability
• Example: Typical design cycle is 12 months for IP license renewal
25

26. Marketing Plan
• What’s the pricing strategy for your product or service ?
• Cost based: Product → Cost → Price → Value → Customers
• Value based: Customers → Value → Price → Cost → Product
• Combo: Cost-based service to enable value-based license
• How does the offering support the business model?
• Packaging and pricing strategy to support variety of needs & uses
• Strategy to enable product derivatives for adjacent market segments
• How to maximize penetration, adoption, proliferation, upgrades?
• How to penetrate customers and increase pervasiveness?
• Among many channels chose a few that matter the most
• Biz Dev, Dedicated Sales, Referral, Viral, Blogs, Portals, P.R.
• Measure what matters most: volume, cost and adoption rate
26

27. Sales Channels
• Which sales & distribution channel you’ll use for your offering?
• Direct: Typical for early stage, or if sale requires domain expertise
• Indirect: Typical for later stage, or if entering a new foreign market
• What are the pros & cons for maximizing revenue and profit?
• Which partners to you have or plan to focus on?
• How do you mutually enable or add value to each-other’s business?
• Can you capture more value with a complete product and solution?
• How do you ensure you will not run into channel conflict?
• Cooperating with competitors for bigger solution – “coopetition”
• What can you both gain short term and what are the risks long term?
• What is the scope of partnership, lifecycle and exit criteria?
27

28. Sales Cycle
• If Direct:
• How long is a typical sales cycle to close a deal (by territory)?
• What sales & field apps resources are needed per engagement?
• Who is the key decision maker vs. influencers and users?
• What is your sales process to maximize the outcome?
• Which sales tactics you’ll use to shorten time to money?
• If Indirect:
• How many partners needed (after commission) to be profitable?
• How do you enable their sales channel to maximize outcome?
• Which tactics you use to convince future partners of your value-add?
• Which joint initiatives you plan? (development, marketing, P.R., etc.)
• How you divide resources and territories to increase profitability?
28

29. Milestones
• State what you’ve done and show what’s next
• How you got to current stage and what have you achieved?
• Show diagram of future achievable milestones based on your stage
• Early Stage: Founding the Business
• Incorporated, started hiring, technology development, patents
• Beta Testing, Deployment, Secure 1st Round, acquiring customers
• Mid Stage: Developing the Business
• Secure 2nd round, ramping Sales & Marketing, getting repeat business
• Emphasize existing customer portfolio and leverage to grow business
• Late Stage: Stabilizing or Expanding the Business
• Retain seasoned executives, secure 3rd round, increase profitability
• Improve infrastructure, increase economies of scale, exit strategy
29

30. Operating Plan
• Show 24-36 month table aligning to milestones
• Built numbers bottom-up going forward from present to future
• Break timeline to calendar quarters (be aware of financial quarters)
• Show total headcount and by function (G&A, R&D, Marketing, Sales)
• Label key operating milestones as described in previous slide
• Include in the table a cash flow plan with the following
• Investment Inflow
• Beginning Cash
• Income Inflow
• Operating Outflow
• Ending Cash
• Net Loss/Profit
30

31. Financial Projections
• State key assumptions and goals for your projections
• How many customers you acquire each year given the sales cycle?
• How much will be new sales vs. recurring sales (e.g. license renewal)
• How does your ASP erode and your costs decrease as you get bigger?
• Develop a simple 4-6 year bar chart with projections
• High level model of aggregate bookings, revenues, expenses, profit
• Built numbers top-down going backward from future to present
• Start where you want to be and built ramp back to bottom-up model
• Refine revenue-expense ratios to scale properly (iterative process)
• Adjust head count and expenses to grow in line with the revenues
• Align with bottom up model & decrease annual cost/employee metric
31

32. Management Team
• How rounded and credible is your team?
• List each member and explain value brought to the team
• State key hires you need but don’t have with respect to milestones
• Describe what specific value you expect them to add to the team
• Use the following format for each team member
• Name, function, expertise position, years of experience, companies
• Major accomplishments, why is he/she is fit for this function
• If you are fundraising VCs look for experience and track record
• Scientists with deep expertise, or architects of proven products
• Entrepreneurs who have built and sold companies before
• Marketing rainmakers and sales dealmakers with proven traction
32

33. Advisory Board
• Technical Advisory Board - Roles
• List each member, expertise, and areas of research
• Describe key innovations, contributions, awards and role
• Justify how their domain expertise fits to your technology plan
• Business Advisory Board - Roles
• List each member, experience, connections, accomplishments
• Describe key accomplishments, contributions, results and role
• Show how the business experience fits to your execution plan
• How is it different than Board of Directors? – Roles vs. Interests
• Board Members represents preferred and common stock interests
• If fundraising look at VC portfolio: How synergistic? Any Conflicts?
33

34. Risk Management
• Analyze risk factors and impact
• Cyclical markets, market shifts, economic environment
• Emerging competitors, partner overlaps and conflicts
• Dependencies on suppliers and product development
• Slippage, missing milestones and impact on cash runway
• Identify options, remedies and Actions
• How you will manage cash flow in different cases
• What is your contingency plan if late to market window?
• How can you shift the business with what you have
• Under which conditions you scale down operation
• If you’re running out of money how to stage an exit
34

35. Capital Required
• Prior Funding History and results
• How much raised from founders, grants and investors?
• What have you accomplished with the previous funds?
• How much you need now? (know your valuation bottom line)
• May want to show 3 budgets: small, medium, large
• How you will spend the money?
• Key hires (deploy product), sales (revenue), infrastructure (scale-up)
• Which milestones reached and how long will it last?
• Quantify (Example: 2 major accounts, 10 installations, proof of ROI)
• Plan for sufficient cash to last you until proof of value is reached
35

36. Summary
• Why you believe you will succeed?
• Summarize solution, value, market, money and team
• Emphasize your sustainable competitive advantage (SCA)
• What are possible exit strategies?
• Explain why you will not fail (lower investor risk)
• State who may want to acquire you and why
• What are the ROI possibilities?
• VCs know the valuations and multiple they can get in a market
• Just show them the money and growth, they can do the math
36

37. 37
Show me the money!

38. The Business Model Canvas
Homework – Use this methodology to
capture a snapshot your business
38
Tom Katsioulas, Technology Executive
https://www.linkedin.com/in/tomkatsioulas/

39. Business Model (Putting it All Together)
• A business model is a description of how a business makes money
• It is the center piece of any business plan
• The purpose of a business model is to insure that
• All functions needed to operate the business are considered
• Cost, risk and revenue are analyzed to ensure they are achievable
• Business models can be described in four parts:
• The offerings (products and services) the business produces & sells
• The business infrastructure required to produce and sell the offerings
• The target customers that the business expects will buy them
• The financial results and profit the business expects to achieve
• The methodology described here has been developed by Alex Osterwalder, PhD
39

40. Four Parts of a Business Model
• Offering(s) – The part of the business that
produces and sells
• Value proposition: quantifiable value of
products and services
• Solution to Pain: how these solve specific
customer problems
• Features & Benefits: what are the key
capabilities that enable the solution
• Infrastructure – The part of the business
that creates expenses
• Core capabilities: The core competencies
necessary to operate the business
• Partner network: The business alliances
needed to operate the business
• Value configuration: The process by which
offerings are deployed to customers
• Customers – The part of the business that
generates revenue
• Target customer: The purchasing patterns
the potential buyers of offerings
• Distribution channel: The means by which
the business delivers the offerings
• Customer relationships: The process of
interacting with customers
• Finances – The part of the business that
determines financial performance
• Investment: The investment needed to
begin or sustain operations.
• Cost structure: The expenses required to
produce the offerings
• Revenue: The income a business receives
from the sales of its offerings
40

41. VALUE
PROPOSITION
COST
STRUCTURE
CUSTOMER
RELATIONSHIP
TARGET
CUSTOMER
DISTRIBUTION
CHANNEL
VALUE
CONFIGURATION
CORE
CAPABILITIES
PARTNER
NETWORK
REVENUE
STREAMS
INFRASTRUCTURE CUSTOMEROFFERING
FINANCE
A business model describes the value an organization offers to various customers and portrays
the capabilities and partners required for creating, marketing, and delivering this value and
relationship capital with the goal of generating profitable and sustainable revenue streams
Business Model Template
41

42. VALUE
PROPOSITION
COST
STRUCTURE
CUSTOMER
RELATIONSHIP
TARGET
CUSTOMER
DISTRIBUTION
CHANNEL
VALUE
CONFIGURATION
CORE
CAPABILITIES
PARTNER
NETWORK
REVENUE
STREAMS
gives an overall view of a
company's bundle of
products and services
portrays the network of
cooperative agreements
with other companies
describes the channels to
communicate and get in
touch with customers
describes the
arrangement of activities
and resources
explains the relationships
a company establishes
with its customers
sums up the monetary
consequences to run a
business model
describes the revenue
streams through which
money is earned
describes the customers a
company wants to offer
value to
outlines the capabilities
required to run a
company's business
model
INFRASTRUCTURE CUSTOMER
OFFERING
FINANCE
describing a company’s business model
42

43. VALUE
PROPOSITION
value proposition 1
value proposition 2
…
OFFERING
describing a company’s offering
43

44. VALUE
PROPOSITION
TARGET
CUSTOMER
value proposition 1
value proposition 2
…
target customer 1
target customer 2
…
CUSTOMEROFFERING
describing who a company offers value to
44

45. VALUE
PROPOSITION
TARGET
CUSTOMER
DISTRIBUTION
CHANNEL
value proposition 1
value proposition 2
…
distribution channel 1
distribution channel 2
…
target customer 1
target customer 2
…
CUSTOMEROFFERING
describing how a company reaches its customers
45

46. VALUE
PROPOSITION
TARGET
CUSTOMER
CUSTOMER
RELATIONSHIP
value proposition 1
value proposition 2
…
relationship type 1
relationship type 2
…
target customer 1
target customer 2
…
CUSTOMEROFFERING
describing the relationships a company builds
46

47. TARGET
CUSTOMER
REVENUE
STREAM
revenue stream 1
revenue stream 2
…
target customer 1
target customer 2
…
FINANCE
VALUE
PROPOSITION
value proposition 1
value proposition 2
…
OFFERING CUSTOMER
describing how a company makes money
47

48. CORE
CAPABILITIES
VALUE
PROPOSITION
core capability 1
core capability 2
…
value proposition 1
value proposition 2
…
OFFERINGINFRASTRUCTURE
describing what capabilities are required
48

49. describing what activities are required
VALUE
PROPOSITION
VALUE
CONFIGURATION
CORE
CAPABILITIES
value proposition 1
value proposition 2
…
core capability 1
core capability 2
…
activity 1
activity 2
…
INFRASTRUCTURE OFFERING
49

50. describing the partners that leverage the business model
VALUE
PROPOSITION
PARTNER
NETWORK
CORE
CAPABILITIES
value proposition 1
value proposition 2
…
core capability 1
core capability 2
…
partner 1
partner 2
…
INFRASTRUCTURE OFFERING
50

51. VALUE
PROPOSITION
COST
STRUCTURE
cost account 1
cost account 2
…
value proposition 1
value proposition 2
…
FINANCEINFRASTRUCTURE OFFERING
describing the costs of a business model
CORE
CAPABILITIES
core capability 1
core capability 2
…
51

52. Your Company Business Model Canvas Template
52

53. Business Model Canvas - References
• These are for your homework to practice defining your business
• https://www.cleverism.com/business-model-canvas-complete-guide/
• https://www.youtube.com/watch?v=QoAOzMTLP5s
• https://canvanizer.com/new/business-model-canvas
• https://www.alexandercowan.com/business-model-canvas-templates/
• http://alexosterwalder.com/
53