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Business  Model Canvas & Financials  LexHive  Corporate Services

Legal ● Accounting ● Start-up Advisory

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Importance  of Financial Management   Transparent Book  Keeping, Projections & MIS Reports enabling sound business decisions  Tracks the financial  h ealth Scientific costing, Inventory Management & Pricing  (Vendors / Customers) Planning & Budgeting Fundraising (Loans or other avenues)  Compliance & Documentation

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Profit & Loss Statement   Sales (also called Income or Revenue):  Total amount from selling your product or service during a certain time period.  Cost of Goods Sold:  Total expenditure for inventory items which customers buy. Cost of Goods Sold consists of the cost of purchasing the items, freight, manufacturing costs, modification costs, and packaging. For services, this is the cost of providing the services, including  labor , material used, and transportation.  Gross Profit:  Sales less Cost of Goods Sold.   Overhead:  Expenses associated with your ongoing business operation, such as rent or utilities.   Net Profit:  Gross Profit less Overhead. Net Profit is what remains to pay for expansion, equipment, loan repayment, income taxes and owner’s draw.

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Cash flow  Statement    Movement of cash over a period of  time  A  cash flow projection  shows  how cash is expected to flow in and out of a business    Helps in forecasting if cash  receipts (in flows) will be sufficient to cover  cash  disbursements (out flows ) A business can be profitable and still run out of  cash

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Benefits of Budgeting   Track all your expenses  Track your revenues  Plan for the future  Plan for expansion  Ensure optimal profit

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Business Model Canvas The  canvas framework  allows  you to easily describe and  deploy  business models to create new strategic  alternatives.  It  is divided into nine building blocks  that  show the logic of how a company intends to make  money. This framework  is widely used f or  finance  management because :  The  simplicity of the  model  The flexibility that enables to adapt  diversified ideas

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Nine Blocks of BMC Customer Segments Value Proposition Channels   Customer Relationships  Revenue Streams Key Resources   Key Activities  Key Partners  Cost Structure

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Financials based on Business Model Canvas Normally,  c anvas  framework does not provide an accurate financial  analysis Financial projections and canvas framework must be synced to overcome the above   Cost structure and revenue stream can be populated at the respective blocks in canvas framework  Exact quantification of other seven blocks is must for the same

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Cost Structure 90% of start-ups fail in the first 3 years due to poor costing approach Three blocks of BMC that have deep impact on cost structure Value Proposition Revenue Stream Customer Relationships Also review Key Activities & Key Resources Work on multiple permutations & combinations of the business model

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Types of Businesses by Cost Structure Cost-driven  Lean organization with low price targeting mass market Internal cost controls given priority Values-driven Focusing on niche market  High value proposition identified with exclusivity

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Characteristics of Cost Structures Fixed Cost  Static expenses regardless of output and usually time bound However, will not remain stable consistently  Capital expenditure (CAPEX) get reflected in balance sheet and not in P&L  Variable Cost  Expenses directly proportionate to the output   Prediction of the same is tough Associated with day-to-day operations (OPEX) Economies of Scale Higher the output; lower the cost per unit Helps lowering both fixed and variable cost

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CASE STUDY – GOOGLE  The biggest internet company with most successful search engine. It cost structure is divided into four categories:   Research & Development  Data Centre Operations  Traffic Acquisition   Sales & Marketing

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RESEARCH & DEVELOPMENT   For improvement of existing products/services Creating new & innovative solutions The above enables varied diversification   DATA CENTRE OPERATIONS    Maintaining millions of servers globally processing    around one billion transactions per day  This involves huge expenses both CAPEX & OPEX  The  phenomenal volume ensures economies of scale optimizing the cost

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TRAFFIC ACQUISITION    Money given to the network through  Adsense  program Payment to websites that redirect user to Google or provide Google toolbar to their customers  These third parties help attract users   SALES & MARKETING     Huge spend on global sales force  The world wide customer support team   Other advertisement & marketing spends

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Revenue Streams  Listing multiple streams based on the customer segments and the same to be defined thoroughly Pricing and lifecycle of each stream to be specified This represents the cash inflow and not profits

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Types of Revenue Streams Transaction Revenue   Mostly one-time payment on sales or service rendering  Recurring Revenue  On-going payments like subscriptions, after sales service, etc.

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Pricing Mechanism  Pricing depends mostly on demand and supply in market   Mass Market  vs  Niche Market Each revenue stream can have it’s own mechanism Pricing has significant impact on revenue generated

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Types of Pricing   Fixed Pricing    Remains same for continuous period due to consistent cost or stable market condition  Dynamic Pricing  Fluctuating pricing due to varying costs and unpredictable market condition

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CASE STUDY – GOOGLE  Google’s services are mostly free  to individual users Its revenue is  by  being an  online advertisement  platform  Revenue Streams:   Adwords Adsense    Others

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GOOGLE ADS     Ads by advertisers displayed on relevant search portals or partner sites Payment   based on the clicks ADSENSE       Delivers ads to individual portals  Google makes  payments to portals based on user clicks / ad impressions OTHERS      Has other revenue streams – mobile apps, OS,  etc However, 96% of its revenue is from ads

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Thank You www.lexhive.in 99437 66959 contactus@lexhive.in

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THANK YOU contactus@lexhive.in 9943766959 www.lexhive.in









Business Model Canvas & Financials 
LexHive Corporate Services


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 Thank You www.lexhive.in 99437 66959 contactus@lexhive.in   

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Business Model Canvas & Financials LexHive Corporate Services

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