Homework due for today
Legend: : Participation | : Early | : PDF | : Team | : Zipped
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Talking to real life entrepreneurs. I would like you to interview a real entrepreneur that founded a company. Not just anyone who says that they are an entrepreneur but someone who actually is in the founding team. I prefer it to be face to face, but telephone or email is also acceptable. Many of you might know family members or aquantances who are founders or know people who know. You can also ask me and/or use LinkedIn.
Try to get answers to questions such as these (use your own words):
- What was your first job after your education, and at what point did you know that you wanted to be an entrepreneur? Also, how did you go from wanting to be an entrepreneur to actually starting the company?
- How did the company develop? How was it successful, how was it not successful? What did you personally do in each scenario?
- Have you started other companies, and how did they go in comparison?
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What are some of the personal traits, talents, skills or knowledge, that have served you well as a founder? What is the mistake you feel is made often in founding a company?
- Deliverable: Write a 1 or 2 page summary report or article about your interview. Try to distill out some lessons. Include a section with your own personal reflection on: what it means to be an entrepreneur, and how you yourself see your entrepreneurship, and what you personally learned and got out of the interview. Submit as a pdf.
- Spreadsheets: Read and learn how to design good spreadsheets. Even if you think you know how, read both of these: How to use a spreadsheet to create a simple budget and Good Spreadsheet Design. Do all the examples in Google Sheets. Show off your knowledge of two important ideas in spreadsheets. Ceate a small but coherent example showing off the use of absolute and relative references, as well the use of the =VLOOKUP function. Deliverable: Submit the url of the google sheet with your work. Don’t forget to make it accessible by all
Continuing Work
- Continue work on Stage 3: Should be completed on December 6. Look at the Term Project Outline. Now we are into the business issues. You will have talked and discussed this along the way. Who is your competition? How will you be different? How are you going to price and what is your financial analysis look like? And how will you plan to drive growth?
Interesting, but not required reading
Let’s work through a detailed example!
- Work in a group to think through this scenario
- Company “MerchMachine”, it’s basically a marketing company
- All sales are through a web site (ecommerce)
- Manufactures and sells t-shirts and similar merchandise
- You can decide what the selling price of the t-shirt is
- With advertising expects to sell 10% more t-shirts each month
- They think that about $1.00 in marketing expense will sell another t-shirt
- You might think that a cheaper t-shirt will sell more per advertising dollar
- All manufacture and shipping is outsourced
- Each t-shirt costs $7 to manufacture and ship
- The company Employs 3 people initially.
- You might decide that they should have more or fewer people
Discussion: Work in groups of 5+/- and have a discsion to be followed by a summary presentation. Consider the company described here and what how each growh engine would be appropriate. Also do some back of the envelope calculations to see what your metrics must look like.
Money
- Life blood of a business are resources
- You consume resources and you generate value
- Remember Gazintas > Gazoutas
Very basic financial modeling
- Basic terms
- Core calculation:
- Profits = Revenues - Costs
- Types of costs
- Fixed
- Variable
- Division is not always clear cut
- Fixed Costs
- Cost you have to get to the first ‘thing’
- First release? First sale? First Orange Juice Sold?
- Rent
- Communications
- Variable Costs
- Marketing expenses
- Salaries
- Raw Materials
- Independent variables
- Units sold?
- Units manuctured?
- Number of employees?
- Number of customers?
- Target new customers per month
‘Programming’
- Learn to be very comfortable with a spreadsheet
- Google Sheets is fine, excel is fancier
Groupwork: Lemonade Stand 2.0
- Form groups of 5 students and model
- Forecast over 1 year in excel
- Answer these questions
- What is minimum initial investment to avoid going out of business
- With an initial investment of $100, how much money in piggy bank at end of year
- Input assumptions. Design model to allow these to be tweaked
- Staff: 2 kids
- Price: $1.50 per cup
- Workweek: 40 hours
- Hourly wage: $6
- Cost for a paper cup: $0.05
- Cost for making lemonade: $0.10 per cup, including labor and raw materials
- First day sales: 100
- Organic growth: 5% per month
- Ad-driven growth: 1% per month for $25 spent on ads
- Advertising spend: $25
- Initial investment from parents: $100
More complicated example
More realistic template
Key Points
- Developing a plan that balances capital/time/milestones
- Deciding what need to do now, and what can be deferred
- Defining your financing milestones
- Determining how much capital to raise for your first milestone
- Insuring you position yourself for the next financing, ideally at a step-up
Next Class