#session 6 - May 18th
WHAT WE DID ON THE sixsiTH CLASS
As always, we couldn´t have started the week without our group presentations. But, this class was the last one before our pitch to real investors in Fábrica de Startups! Teams presented their key activities, resources and partners as well as the correspondent hypothesis to be tested and some results. Teams are going in the right track and work is almost finished.
However, a few essential things still need to be done: the financial part! Investments and costs need to be evaluated and a financial plan is imperative in this stage of the businesses.
Regarding costs we learned that every business should look for economies of scale and scope at some point. When businesses start to grow and expand into other areas it is important to share processes within businesses in order to reduce costs and take advantage of the existent know how. Also, companies have fixed and variable costs. However, all companies should try to have the less fixed costs possible, since it makes the costs structure heavier. Outsourcing is the best solution, still, is important to be careful with the type contracts. So, outsourcing and having variable costs are the best answer.
However, a few essential things still need to be done: the financial part! Investments and costs need to be evaluated and a financial plan is imperative in this stage of the businesses.
Regarding costs we learned that every business should look for economies of scale and scope at some point. When businesses start to grow and expand into other areas it is important to share processes within businesses in order to reduce costs and take advantage of the existent know how. Also, companies have fixed and variable costs. However, all companies should try to have the less fixed costs possible, since it makes the costs structure heavier. Outsourcing is the best solution, still, is important to be careful with the type contracts. So, outsourcing and having variable costs are the best answer.
Concerning the financial plan, the professor stressed the fact that business people should not work for the numbers but that numbers should work for them instead. Meaning that, the business should run in a way that the numbers are positive and it is not need to be changing anything in order to have a better financial result. Nevertheless, it is very important to know our business in numbers, since it shows credibility and investors like that. So, monetize actions, plans and decisions is essential to guarantee profitability of the amount invested and get funded! And this what a startup business is all about: get funded by investors! Besides this ones are looking for, at least, 20% profitability, so, it is mandatory to have a well-structured financial plan!
The main components of a financial plan are: income statement (provides information on the results generated in an organization over a certain period of time -> results=income-expenditures), balance sheet (presents the financial position of an organization at a given time. The financial position reflects the values of the assets, the liabilities and equity) -> Equity = Assets – Liabilities) and cash flow statement (shows the changes that occur in a given period of time in the cash accounts and their equivalents, structuring these variations by nature). All investors require this tools and, also, having one in a business board is good in order to strength people to be aware of what is going on and keep focus. Plus, a Business Plan is always required to present to investors so that they can learn about the business and get familiar with it.
Therefore, in order to get the business capital needs fulfilled, it´s key to know some sources of financing, that vary according to the risk and stage of a business, as you can see in this graphic:
The main components of a financial plan are: income statement (provides information on the results generated in an organization over a certain period of time -> results=income-expenditures), balance sheet (presents the financial position of an organization at a given time. The financial position reflects the values of the assets, the liabilities and equity) -> Equity = Assets – Liabilities) and cash flow statement (shows the changes that occur in a given period of time in the cash accounts and their equivalents, structuring these variations by nature). All investors require this tools and, also, having one in a business board is good in order to strength people to be aware of what is going on and keep focus. Plus, a Business Plan is always required to present to investors so that they can learn about the business and get familiar with it.
Therefore, in order to get the business capital needs fulfilled, it´s key to know some sources of financing, that vary according to the risk and stage of a business, as you can see in this graphic:
Other important concept to succeed, is the Bootstrapping. Which refers to the starting of a self-sustaining process that is supposed to proceed without external input. It is one of most effective and inexpensive ways to ensure a business' positive cash flow and it means less money has to be borrowed and interest costs are reduced.
So, how to do it? You can start selling as soon as possible; provide high value, high margin products; have fewer people than necessary; control growth; focus on revenue, not profit; associate, create alliances, with other strong brands; start at home (or garage); in the beginning do not receive (or pay) wages; use free advertising and word-of-mouth; use free collaboration.
Now, we´re ready to present our business do investors through amazing pitches! Do not forget the 10/7/28 rule: 10 slides, 7 minutes and 28 letter font. Also, a pitch should include information about customers, the problem, the solution, technology used, marketing and sales , competitors, the team , traction, financial info and the calendar.
So, how to do it? You can start selling as soon as possible; provide high value, high margin products; have fewer people than necessary; control growth; focus on revenue, not profit; associate, create alliances, with other strong brands; start at home (or garage); in the beginning do not receive (or pay) wages; use free advertising and word-of-mouth; use free collaboration.
Now, we´re ready to present our business do investors through amazing pitches! Do not forget the 10/7/28 rule: 10 slides, 7 minutes and 28 letter font. Also, a pitch should include information about customers, the problem, the solution, technology used, marketing and sales , competitors, the team , traction, financial info and the calendar.