Customer Perception of Value

From the choices usually available in a marketplace, customers determine which supplier offers the best value. Different customers have different needs, different wants, different desires. Hence, multiple competitors may well exist in the same marketspace. However, seldom do competitors have the same market share. Typically, one company wins the vote for "best value" from a plurality (or majority) of potential customers

In a nutshell, customers determine value by which supplier offers the best benefits at the optimal price.

Value = Benefits/Price

Great value, super bargain!: the benefits greatly exceed the price ... Value = ++
Good value: the benefits outweigh the price ... Value = +
Fair value: the benefits match the price ... Value = OK
Bad value: the price outweighs the benefits ... Value = -
Rip off!: the price greatly exceeds the benefits ... Value = --
To increase value, either add benefits or decrease price.
The "quick and dirty" way to enhance value is to have a "Sale!" ... "50% off, limited time only!"

Customers make their buy decisions primarily based on their perceptions of value, comparing the options offered from several sources. How many sources are included is a customer decision, and not always entirely logical. One of the key values of a brand is to make the buying decision easy for the customer ... "I'll just by an Apple computer rather than explore other options."

Some benefits are determined objectively ... fit, form, function, feel, features, performance ...
Some benefits are determined subjectively ... color, smell, brand name, shape ...
Some aspects of the price are direct ... the cost ...
Some aspects of the price are indirect ... warranty, convenience of purchase ...

Ways to deliver value to a customer:
- Product: performance, quality, features, brand, selection ...
- Price: fair, visible, consistent, reasonable
- Access: convenient, location, nearby, at-hand
- Service: ordering, delivery, return, check-out
- Experience: emotional, respect, ambiance, fun, intimacy ...
- Process: ways of doing business that are consistent and comfortable

Characteristics of a Great Venture Plan

1. Presents a clear explanation of why the venture concept is a significant opportunity.
2. Provides a concise description of the venture's products or services.
3. Provides a clear, rational explanation of why the venture idea is better than anything else already available.
4. Succinctly explains customer benefits in qualitative and quantitative terms.
5. Provides a clear explanation of the one or two things the company does best.
6. Focuses on market-driven opportunities.
7. Provides evidence of customer acceptance of the venture's products and services.
8. Presents evidence of the marketability of the products and services.
9. Presents a quality, sophisticated, experienced management team, advisors, and board of directors with complementary and encompassing business skills.
10. Gives a clear sense of what the founders expect to accomplish in 3 to 7 years.
11. Provides a rational explanation of why the investor should trust the management team to do what they say they are going to do.
12. Identifies all the alternatives available to prospective customers.
13. Addresses how the venture will develop and sustain a distinct competitive advantage.
14. Addresses how the venture will develop and sustain a proprietary position.
15. Contains reasonable financial projections with key data explained and justified.
16. hows how and when the venture will generate sustainable positive cash flow streams.
17. Describes the manufacturing and/or service delivery processes and associated costs in appropriate detail.
18. Explains and justifies the level of product development required.
19. Justifies financially the means chosen to sell the products and services.
20. Supports credible growth projections.
21. Provides a clear explanation of how the money invested in the venture will be used.
22. Shows how and when the venture will generate sustainable profit.
23. Shows an appreciation of investor needs.
24. Shows how investors can cash out in three to seven years, with an appropriate return on their investment.
25. Provides a clear explanation of what the investor will get for their investment.
26. Identifies significant risks and proposes rational contingencies.
27. Has the right appearance...not too fancy, not too plain.
28. Is arranged properly with the executive summary, table of contents, and chapters in right order.
29. Is the "right length"...not too long, not too short...to convey all the pertinent information.
30. Is plausible throughout.
31. Has facts rather than opinions
32. Is quantitative rather than qualitative
33. Stresses specifics rather than generalities
34. Reads like a combination of the Wall Street Journal, a model of good business writing, and USA Today, a model of good story-telling

[3.20]

Tips for Better Presentations

When considering what type of visual representation to use for your data or ideas, there are some rules of thumb to consider:

1. Use visuals (slides) sparingly. One of the biggest problems in some presentations is the overuse of visuals. A useful rule of thumb is one visual for every one to two minutes of presentation time. Fifteen minute presentation means fifteen slides!
2. Use visuals pictorially. Graphs, pictures of equipment, flow charts, etc., all give the viewer an insight that would require many words or columns of numbers.
3. Present one key point per visual. Keep the focus of the visual simple and clear. Presenting more than one main idea per visual can detract from the impact.
4. Make text and numbers legible. Minimum font size for most room set-ups is 18 pt. Can you read everything? if not, make it larger. Highlight the areas of charts where you want the audience to focus.
5. Use color carefully. Use no more than 3-4 colors per visual to avoid a rainbow effect. Colors used should contrast with each other to provide optimum visibility. For example, a dark blue background with light yellow letters or numbers. Avoid patterns in colour presentations; they are difficult to distinguish.
6. Make visuals big enough to see. Walk to the last row where people will be sitting and make sure that everything on the visual can be seen clearly.
7. Graph data. Whenever possible avoid tabular data in favor of graphs. Graphs allow the viewer to picture the information and data in a way that numbers alone can’t do.
8. Make pictures and diagrams easy to see. Too often pictures and diagrams are difficult to see from a distance. The best way to check is to view it from the back of the room where the audience will be. Be careful that labels inside the diagrams are legible from the back row also.
9. Make visuals attractive. If using color, use high contrast such as yellow on black or yellow on dark blue. Avoid clutter and work for simplicity and clarity.
10. Avoid miscellaneous visuals. If something can be stated simply and verbally, there is no need for a visual.

[Thank you, Ian McKenzie]

Income Statement

Their First Home

Sure, they're big and famous now, but take a look at their first "starter" homes!

Every Healthy Venture Looks Like This

Common Venture Plan Mistakes

1] Vagueness ... We see this a lot when people are afraid that someone will steal their idea. Lenders and investors are not interested in going into business themselves. They’re looking for places to put their money where they can get a desired return. If your business plan is too vague, they won’t understand what you’re doing, and they’ll put their money elsewhere.

2] Broad, Unsubstantiated Statements ... "Everyone loves ________________ …" Everyone? Fill the space with anything – chocolate, puppies, May flowers – and there is someone out there that just hates it, guaranteed. How about "There is a dire need for …" Dire? Are people dying in the streets because they don’t have your product or service? Not likely. Or "It is a known fact…" Known? By who? Don’t make broad, general statements you can’t substantiate.

3] Overly Optimistic Financial Projections ... You’ve got to have a positive attitude. But don’t be so positive that the reader will wonder if you realize that no one can predict the future with complete accuracy. Run scenarios that take various possibilities into account. You want to show lenders that you can pay back their loans or investors that you can pay dividends even if problems do crop up.

4] No Discussion of Risk ... Overly optimistic projections are usually accompanied by an absence of any discussion of risk. It is really important that you think about what can go wrong with your business and what you’re going to do if that happens. You can be absolutely sure that your reader will figure out what your risks are. You’d better assure them that you’ve thought about risk and have plans for dealing with it.

5] Inconsistency ... Does your marketing plan include tv advertising but your projections show only $200/month in advertising expenditures? That’s a real disconnect that any savvy reader will pick up right away. Chapters in a business plan are not separate, stand alone pieces. They all have to weave together to show that you know what you are doing.

6] Unrealistic Financial Assumptions ... Imagine 5-year projections with energy bills remaining constant over the entire five years. Or gross profit margins of 35% in the first year and 60% in the third. These things just don’t happen very often in real life. Make sure your numbers reflect the real world.

7] Sloppiness ... Spell-checker is a great tool but if your typo is another perfectly good English word it won’t get flagged. Not only should you proofread your business plan, but have one or more people who haven’t seen it before read it, too. We all have a tendency to see what we intended to write rather than what we actually typed. Fresh eyes are invaluable. And make sure you’ve double and triple-checked your numbers. Numbers that don’t add up correctly make a very bad impression.

8] Doesn’t Know the Market ... You really need to show that you know and understand your market(s). That means you’ve got to do some serious research. Here is where an outside consultant may be helpful. But with all the information available on the internet, you can do a good job by yourself if you put in the time and effort. See the Internet Resources page for some good websites.

9] Doesn’t Know the Competition ... No matter how unique your product or service, there’s always competition. Suppose, for example, that you were thinking of opening a bowling facility in a location where there isn’t another within a 25 mile radius – or even a 50 mile radius. You may think you have a monopoly. But that’s because you don’t recognize what your market really is. It isn’t the bowling market – it’s the recreation and entertainment market. Your competitors are movie theaters, amusement parks, miniature golf ranges, etc. If you don’t recognize this then how are you going to compete effectively?

10] Knocks the Competition ... People dismiss their competition too easily. First of all, if they’ve been in business for any length of time they must be doing something right. Ignore that at your own peril. If your widgets are better than theirs, then maybe their prices are lower or their service is superior or their advertising is more effective or their location is better. It’s not enough to know what’s wrong with your competition. If you’re going to succeed you’ve got to know what they do well and be prepared to compete with that.

11] Doesn’t Focus on the Reader ... Who are your readers and what do they want? Here’s a brief rundown:

• Bankers: They want to know how you’re going to repay the loan.
• Investors: They want to know if you’re going to be profitable enough to give them a high return either through dividends or by taking the business public.
• Strategic Allies: They’re going to have to spend a lot of time and money to do joint business with you. They want to know if it will be worth the investment.
• Major Clients (for Preferred Vendor Status): They’re going to invest time and money to bring you into the fold. The want to be sure you can deliver what they need, when they need it, at a price they can afford....AND that you're strong enough to be around for the long haul.

[Thanks, Victoria Posner]

Entrepreneurial Mindset

1. Take responsibility
2. Get results
3. Create value
4. Earn a profit
5. Solve customer problems
6. Create competitive advantage
7. Customer and quality driven
8. Generate wealth
9. Share the wealth with those that create it

Buying a Hot Dog Decision Process Flow

Even a relatively simple purchase may have a fair amount of complexity. Take buying a hot dog as an example ...

Traditional Venture Plan Outline

COVER PAGE

1. Venture Title
2. Tag Line
3. Logo
4. Principles and Positions
5. Contact Information
6. Copyright and Disclaimers

EXECUTIVE SUMMARY

1. Description of the Problem or Opportunity
2. The Business Venture Concept and Solution
3. Key Business Model and Venture Strategies
4. Target Market and Projections
5. Competitive Advantages
6. The Team
7. The Offering
   

THE INDUSTRY AND THE COMPANY

1. The Industry
2. The Problem or Opportunity
3. The Product and Service Solutions
4. The Company and the Concept
5. Entry and Growth Strategy
   

MARKET RESEARCH AND ANALYSIS

1. Target Market
2. Customers
3. Market Trends
4. Direct and Indirect Competition
5. Estimated Market Shares Sales
6. Competitive Advantage
7. On-going Market Evaluation
   

ECONOMICS OF THE BUSINESS

1. Business Model
2. Gross and Operating Margins
3. Profit Potential and Durability
4. Fixed, Variable, and Semi-variable Costs
5. Months to Breakeven
6. Months to Reach Positive Cash Flow

MARKETING AND SALES PLAN

1. Marketing Strategy
2. Pricing
3. Sales Strategies
4. Sales Forecast and Methodology
5. Distribution
6. Advertising and Promotion Strategies

DESIGN AND DEVELOPMENT PLAN

1. Development Status and Tasks
2. Difficulties and Risks
3. Product Improvement and New Products
4. Costs
5. Proprietary Issues
6. Intellectual Property Issues

MANUFACTURING AND OPERATIONS PLAN

1. Operating Cycle
2. Geographical Location
3. Facilities and Improvements
4. Operational Strategy
5. Operational Plans
6. Regulatory and Legal Issues

MANAGEMENT TEAM

1. Organization and Legal Structure
2. Key Management Personnel
3. Management Compensation and Ownership
4. Employment and Other Agreements
5. Stock Options and Bonus Plans
6. Board of Directors
7. Investors and Shareholders
8. Supporting Professional Advisors and Services

SCHEDULE AND DEVELOPMENT PLAN

1. Timeline
2. Development Goals and Strategies

CRITICAL RISKS, PROBLEMS, AND ASSUMPTIONS


THE FINANCIAL PLAN

1. Actual Income Statements and Balance Sheets
2. Pro Forma Income Statements
3. Pro Forma Balance Sheets
4. Pro Forma Cash Flow Analysis
5. Break·Even Chart and Calculation
6. Cost Control Strategies
   

PROPOSED COMPANY OFFERING

1. Required Financing
2. Valuation
3. Offering
4. Capitalization
5. Use of Funds
6. Return on Investment
   

SUMMARY

1. Summary of Business Venture
2. Mission Statement
3. Vision Statement

APPENDIXES

1. Resumes
2. Product Data Sheets
3. Marketing Material
4. Detailed Research
5. Issues of Sustainability of the Venture
6. Impact on the Environment
7. Impact on the Community
8. Service and Warranty Policies