This unit will cover the fundamentals on how to use a financial model pre-built in google or excel spreadsheets to determine the financial viability of a business. The model can easily be used with a basic understanding of spreadsheet functionality. Students will learn the inputs to the model which include assumptions on sales, costs, pricing, and growth rates. Students begin the unit learning pricing strategies, and then cost estimating expenses for their business idea. The unit concludes with students entering model inputs to develop a working financial model outlining potential profits and losses around their business.
Becoming familiar with the models functionality and input requirements will prepare teams to generate the basic financial information needed for MVP pitch in the following Unit. There will be categories of expenses and inputs that will require students to make best guess estimates. Getting comfortable with the process of educated estimating and uncertainty is part of learning the discipline of entrepreneurship.
- Entrepreneurs validate their business ideas by going through a series of financial tests.
- How can market influence impact businesses?
- How can financial planning affect a business’s bottom line?
- How do I evaluate the financial feasibility of a business idea?
Expected Outcomes by end of Unit
- Students will develop a pricing strategy and price to be tested for their product or service.
- Students will define the market size opportunity for their business in terms of a total addressable market and serviceable addressable market.
- Students will complete a financial model for their business and compare how different revenue and expense inputs impact viability.
- Pricing Strategies
- Anchor Pricing
- Value Based
- Cost Plus
- Market Sizing
- Total Addressable Market (TAM)
- Serviceable Addressable Market (SAM)
- Market Share/Share of Market (SOM)
- Gross Revenue
- Operating Revenue
- Net Revenue
- Cost of Goods Sold (COGS)
- Sales and General Administrative (SG&A)
- Start up costs
- Income Statement
Each team will make a 4 to 6-minute presentation to share with the rest of the class. You will be graded according to this rubric. Follow this structure for your presentation:
- Introduce team and company via an elevator pitch.
- What is the problem you are trying to solve?
- How will you be solving the problem (solution)?
- Who has this problem (customer segment)? What value do you provide them?
- What did you learn? (Should tie into content)
- Explain your pricing strategy for your business?
- Explain your TAM, total addressable market, and SAM serviceable addressable market?
- What does this market size number tell you about the segment and the business opportunity your team is pursuing?
- How did you learn this? (how many customer interviews, who did you talk to, where did you research or was it part of curriculum)
- How to did you calculate these numbers, where did you source your information.
- How did you determine your pricing hypothesis? How does it compare to competitive alternatives
- How did your business model canvas change because of it?
- Show your initial BMC and then reveal your new BMC that applies the learnings presented earlier.
- Make sure the changes are visible (different color text, etc.) Speak only to the changes as I will review the rest of the BMC through Canvas.
- What is risky about your pricing and market size assumptions?
- What do you need to test next?