1. Business Model Analysis for the Entrepreneur

2. Business Models
A business model is the summation of the core business decisions and trade-offs employed by a company to earn a profit.
In general, these elements fall into four groups:
Revenue sources
Cost drivers
Investment size
Critical success factors
Source: A Note on Business Model Analysis for the Entrepreneur HBS Note N

3. Draw The Business Model
Driver 1
Driver 1
Revenues
Driver 2
Driver 2
Driver 3
Driver 3
Cash Profits
Driver 1
Using the tool
1. Draw the key drivers of revenue and cost
2. Identify key drivers and quantify assumptions
3. Test sensitivity to changes in key drivers
4. Identify Key Success Factors for monitoring
Costs
Driver 2
Driver 3

4. Analyzing the Business Model
Determine revenues, timing and key drivers
Determine costs/expenses, timing and key underlying drivers
Same for investment
Determine the key unit of analysis: a customer / store / unit

5. Using The Business Model to Drive a Forecast
Play out the business model over time, looking at P&L and cash flow
How much cash is required to get the business to cash flow breakeven

6. The Cash Flow Cycle for a Venture
Cumulative Cash Flow in $
Date of First Cash Flow Positive
Time
Maximum Financing Needs
Date of Cash Breakeven
Burn Rate

7. Business Model Analysis Framework
How Output Valued
Inputs
Recipe
Target
Outputs
People
Revenues
Value Creation via
Money
Customer Base
Profits
IPO
Merger/ Acquisition
Dividend Stream
Business
Model
Market Opportunity
License Revenues
Intellectual Capital
Cash Flow
Intellectual Property
Physical
Assets

8. Exhibit 1: Fishbone Diagram for The Grateful Dead Revenue Model
# Concerts
Concert
Revenue
# Tickets
Revenue/Concert
Price/Ticket
# Concerts
Total Revenue
Merchandise
Revenue
# Attendees
Revenue/Concert
Revenue/Attendee
Albums Recorded
Recording
Revenue
# Albums Sold
Revenue/Album
Revenue/Album

9. Exhibit 2: Fishbone Diagram for Seven-Eleven Japan Cost Structure
Price/SKU
Cost of Goods Sold
# of Suppliers
Inventory Turns
Development Costs
Information
Technology
Implementation Costs
Maintenance
Total
Cost
Head Office Payroll
Payroll
Employees/Store
Daily Wage/Employee
Square Footage/Store
Price/Square Foot
Facilities
Advertising Cost/Store
Company-wide Spend
Marketing/
Advertising

10. Exhibit 4: Cumulative Cash Flow Diagrams for Two Hypothetical Medical Device Ventures
Medical Devices Company Giving Away Instrument
Time
Medical Devices Company Selling Instrument