Lessons Learned – Week 10

This week of classes was mainly about financial considerations one should make when developing an entrepreneurial venture. The corresponding part of the Business Model Canvas for this is the cost structure. Although financial planning might seem unintuitive on first sight when following a lean entrepreneurship approach, rudimentary financial analyses need to be made to ensure the profitability of a venture and to apply for funding. Important questions that need to be considered in the context of financial planning are: what are your key investments during the first year? How much cash do you need until your breakeven point? Can you estimate your fixed and variable costs (fixed costs should not be greater than variable costs)? These questions might be difficult to answer in some cases – if so working assumptions need to be made to derive plausible conclusions.

In class we then estimated investments, variable and fixed costs that are necessary for our business. Based on these estimates we then started developing a more sophisticated financial plan consisting of an income statement, a balance sheet, and a cash flow statement. While developing this financial plan two indicators are key: first, the customer acquisition costs and second the customer lifetime value. One key learning in this context is that the customer lifetime value should always be higher than the customer acquisition cost. The financial plan including answers about investments, variable and fixed costs can be found in the following pictures.

Moreover, the financial plan was supposed to provide the foundation for developing a business plan for our entrepreneurial venture. The business plan consists of an executive summary, a description of the team, the business model, target markets, a marketing plan, a plan for key resources and activities to make the value proposition work, a financial analysis, an analysis of external conditions, an implementation program, a risk analysis, and a conclusion.

Apart from classwork we had three learning this week.

ALTHOUGH YOU FOLLOW A LEAN APPROACH FINANCIAL PLANNING IS NECESSARY

At first sight we all though that creating an extensive financial plan is counterintuitive when following a lean approach. However, class discussions have made it clear that an extensive financial plan is necessary to ensure profitability and to apply for funding. This shows that although following a lean approach one should not be too stubborn but be practical when adapting to external demands.

CONTINIOUSLY DOING EXERCISES IN PAST WEEKS MAKES CREATING THE BUSINESS PLAN EASIER

When we first saw the exercise of creating a business plan our team was overwhelmed. In some classes creating a business plan is a semester long project and we were supposed to do it within one week. However, we quickly realized how much work for creating the business plan we had already done in prior weeks. Hence, creating the business plan was work intensive but not impossible to achieve. Moreover, when we realized how much work we had already done in past weeks we as a whole team felt proud about our so far achievements and even more motivated to keep up the good work.

CREATING MOCKUP SCREENS INCREASES WEBSITE QUALITY

This week we finally created mockup screens of fload. Check out the screens under the landing page of our website. After having created the mockup screens one can quickly see how the quality of our website increased. Moreover, through the mockup screens it is even easier to understand the purpose of fload. We recommend all other groups to create mockup screens of their product!