15 May 2014
Why even capital backed ventures need a plan B
Most new ventures, even those with venture capital backing share one common characteristic. They fail. A leading academic who will speak at London Business School’s Global Leadership Summit, argues that the typical start-up process, largely driven by poorly conceived business plans and based on untested assumptions, is seriously flawed.
John Mullins, Associate Professor of Management Practice in Marketing and Entrepreneurship, London Business School and acclaimed author of “Getting to Plan B: Breaking Through to a Better Business Model”, says: “There is a better way to launch new ideas—without wasting years of your time and loads of investors’ money.
“This better way is about discovering a business model that really works: a Plan B which grows out of the original idea, builds on it, and once it’s in place, enables the business to grow rapidly and prosper.”
If the founders of Google, Starbucks, or PayPal had stuck to their original business plans, Dr Mullins says, we would likely never have heard of them. Instead, they made radical changes to their initial models, became household names, and delivered huge returns for their founders and investors.
“It’s an uncomfortable fact”, says Dr Mullins, “But developing a better business is absolutely achievable, provided entrepreneurs quantitatively address five crucial elements.”
Five ways to transform your business model
- Revenue Model
Who will buy?
- How often?
- How soon?
- At what cost?
- How much money will you receive each time a customer buys?
- How often will they send you another cheque?
- Gross Margin Model
- How much of your revenue will be left after you have paid the direct costs of what you have sold?
- Operating Model
- Other than the cost of the goods or services you have sold, what else must you spend money on to keep the lights on?
- Working Capital Model
- How early can you encourage your customers to pay?
- Do you have to tie up money in lots of inventory waiting for customers to buy?
- Can you pay your suppliers later, after the customer has paid?
- Investment Model
- How much cash must you spend up front before enough customers give you enough business to cover your costs?
Dr Mullins will speak on business model innovation at London Business School’s Global Leadership Summit in collaboration with Deloitte, alongside:
- Michael Elias, Managing Director, Kennet Partners
- Jimmy Maymann, Chief Executive Officer, Huffington Post Media Group
- Dale Murray, Angel Investor; Non-Executive Director, UKTI