How To Develop The Business Concept: Robert H. Hacker

FIU’s Entrepreneur’s HOW
TO Webinar Series
How to Develop
the Business Concept
ROBERT H. HACKER
January 20, 2009
Picture 5
Robert
Robert H. Hacker rhhfla@mindspring.com H.http://sophisticatedfinance.typepad.com
Hacker rhhfla@g.com © All rights reserved
1 1
Sales 6 Years After Start-up
Sales $Millions Number of firms %

100 200 0.03%
50 500 0.08%
5 9,500 1.6%
<5 579,800 98.3%
Total 590,000 100%
Robert
2 2
Out of Business in 5 Years
55 %
Robert
3 3
Keys to Success
• PICK RIGHT INDUSTRY AND

OPPORTUNITY
• MENTORING
• CAPITAL
Robert
4 4
Stages of Development
• PROOF OF CONCEPT 0-$1MM

• COMMERCIALIZATION $1-3MM
• SCALING $3-10MM
• GROWTH $10-30MM
• PROFESSIONALIZATION $30-100MM
Robert
5 5
The Process
GROWTH SURVIVAL
STEP1 STEP2 STEP3 STEP4 STEP5
CUSTOMER CONCEPT INDUSTRY BUSINESSMODEL FINANCIAL MODEL
Robert
6 6
Austin on Creativity
Step Requirement
1 Interest You have to enjoy it to persist
2 Preparation Study it
3 Incubation Keep working
4 Illumination Solutions Will come
5 Verification ConfirmConclusions
6 Exploitation Act
Robert
7 7
1.Customer Needs
Gerald Zaltman's seven metaphors for the
subconscious that explain 70 percent of
human behavior
2. Balance (equilibrium)
3. Transformation (changing states or status)
4. Journey (as in life)
5. Container (keeping things in and keeping things
out)
6. Connection (feelings of belonging or exclusion)
7. Resource (providing survival)
8. Control
As quoted from HBS Working Knowledge)
Robert
8 8
1. Customer Needs
NINTENDO APPROACH
2. DO NOT FOCUS ON PRODUCT--GAMEBOY
3. DO NOT FOCUS ON COMPETITION--MICROSOFT,
SONY
4. FOCUS ON DEFINING THE NEED--WHAT TO DO
IN SPARE TIME
Robert
9 9
STEP 1: Customer Needs
New Business Types
2. Do something better (market exists)

3. Do something in a new way
(disruptive technology)
4. Do something new (highest risk)
Robert
10 10
A THOUGHT
Disbelief is more resistant than

faith because it is sustained by
the senses
Gabriel Garcia Marquez
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11 11
2. Solution
• Hypothesis
• Iterative process
• Evolving
• Stalking horse
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12 12
STEP 3: Industry Analysis
Porter’s Strategic Analysis
Source:http://www.quickmba.com/strategy/
Robert H.http://sophisticatedfinance.typepad.com
Robert H. Hacker rhhfla@mindspring.com
porter.shtml
13 13
STEP 3: Deliverables
• DIFFERENTIAL ADVANTAGE
– UNIQUE, SUSTAINABLE OR PROPRIETARY
• TARGET CUSTOMER
– CHARACTERIZE IN DEPTH WHO YOU ARE
GOING TO SELL TO
Robert
14 14
Differential Advantage
2. Unique or
3. Proprietary or
4. Patent or
5. Barrier to entry or
6. Regulation
Robert
15 15
Target Customer
(Market Segmentation)
METHODS
• Demographics
• Market research
• Talk to customers
• Alpha/Beta test
• Profitability analysis
• Use them all
Robert
16 16
STEP 4: Business Model
• REVENUE MODEL
• PRICE MODEL
• SALES & DISTRIBUTION
• CAPEX
• HEADCOUNT
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17 17
Revenue Model
• WHAT DRIVES THE BUSINESS AND

CREATES THE GROWTH
Growth Drivers Industry Translation
1 Units Manufacturing Accounts

2 NewLocations Retail/Restaurants CAPEX
3 Subscribers Web/Direct Mail Customer Acquisition Cost
4 Distribution Consumer Products Outlets
5 Sales People Services Calls/Closes
Robert
18 18
Pricing Model
$/UNIT
ADDITIONAL SERVICES (S&H)
FREE
FREE TRIALS
BOGO (BUY 1, GET ANOTHER)
LICENSING (I.P.)
18 ADVERTISING
MEMBERSHIPS-SUBSCRIPTIONS
PRICING COMMISSIONS
REFERRAL DISCOUNTS
MODELS DONATIONS
RENTALS
ADD-ONS
SERVICE/MAINTENANCE FEES
LEASING
INTERVALS
FREE BASIC SERVICE-CHARGE FOR PREMIUM
BARTER
Robert
19 19
Sales & Distribution
• THE TACTICS FOR HOW TO GET A

CUSTOMER AND CLOSE
• CONFUSED WITH "MARKETING"
• NOT TAUGHT IN SCHOOLS
Robert
20 20
STEP 5: Financial Model
• PURPOSE OF FINANCIAL MODELS

– DEMONSTRATE MARKET OPPORTUNITY
(SIZE)
– CLARIFY/REINFORCE BUSINESS MODEL
– DEMONSTRATE INDUSTRY KNOWLEDGE
– PRESENT BUSINESS LOGIC
– UNDERSTAND CASH FLOW
Robert
21 21
STEP 5. FINANCIAL MODEL
• PARTS OF A FINANCIAL MODEL

– BUSINESS MODEL ASSUMPTIONS
– SOURCES AND USES
– P&L
– BALANCE SHEET
– CASH FLOW STATEMENT
Robert
22 22
MY CONTACTS AND
ON-LINE RESOURCES
• rhhfla@mindspring.com
• BLOG
http://sophisticatedfinance.typepad.com
• EXCEL SEARCH ENGINE
http://tinyurl.com/6nw9c5
• LINKED IN
• FACEBOOK
• TWITTER (rhhfla)
• DELICIOUS (rhhfla)
Robert
23 23

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FIU’s Entrepreneur’s HOW

Sales $Millions Number of firms %

• PICK RIGHT INDUSTRY AND

• PROOF OF CONCEPT 0-$1MM

STEP1 STEP2 STEP3 STEP4 STEP5

CUSTOMER CONCEPT INDUSTRY BUSINESSMODEL FINANCIAL MODEL

3 Incubation Keep working

4 Illumination Solutions Will come

2. Do something better (market exists)

Disbelief is more resistant than

• WHAT DRIVES THE BUSINESS AND

1 Units Manufacturing Accounts

• THE TACTICS FOR HOW TO GET A

• PURPOSE OF FINANCIAL MODELS

• PARTS OF A FINANCIAL MODEL

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