Business 101.1 class 9 NYU ITP

Business 101.1
A class in business. And entrepreneurship.
Fall 2016
NYU ITP
November 14, 2016
Josh Knowles
Jen van der Meer
Extra love from Tom Igoe
And the Leslie E-Lab

Syllabus Map
START +
Form
Teams
Business
Models
Customer
Development
How to
Interview
Value
+ The Purpose
of Business
Values
Motivation
Team
Customer
Relationships
+ Channels
Analytics
Key Resources
Activities
Partners
Biggest Vision
Analyze Test
The Money
Plan MVP
Turning
Insights Into
Features
More MVP
How small,
How big?
Launch MVP
Lessons
Learned
Go/No Go?
Sketch
Paper
Prototype
Oz Test
Smallest MVP
Tech
Architecture

Business
models are
for people
Business
models are
for people

Business model
innovation in 5
hard steps
Business model
innovation in 5
hard steps

3. Search for the
starter model that
launches your vision

Whom do you
want to serve?
What problem
do you see?

ALWAYS START WITH THE CUSTOMER:
Customer
Segments
Customer
Relationships
Value
Proposition
Key ActivitiesPartners
Key Resources
Customer
Channels
RevenuesCosts
Source: Strategyzer Osterwalder, Pigneur
Whom are you here to serve?

Get out of the building

Customer
Segments
Customer
Relationships
Value
Proposition
Customer
Channels
VALUE?
What problem do you see?

5. Business model
validation =
ask for help

Ask for help
GET OUT OF THE BUILDING

Customer
Segments
Customer
Relationships
Value
Proposition
Key
Resources
Customer
Channels
RevenuesCosts
GET TO VALUE PROPOSITION FIT

TEST YOUR PROPOSITION WITH CUSTOMERS
Validate with customers

Customer
Segments
Customer
Relationships
Value
Proposition
Key
Resources
Customer
Channels
RevenuesCosts
AND THE REST OF THE BUSINESS MODEL WILL FOLLOW

1. Deﬁne your vision
2. Add people
3. Find your starter
business model
4. Get out of the
building
5. Ask for help

That’s how we’re
going to get
through this.
That’s how we’re
going to get
through this.

HOW WILL YOU MAKE MONEY?
YEAR ONE.
JUST A HYPOTHESIS.

BALANCE SHEETS
CASH FLOW
INCOME
STATEMENTS

Major Themes:
How business generates proﬁts or losses
How to raise capital to start a company
How to monetize your business investment

Start a business:
First we need to determine how much money
(capital) we need to run our business.
How much it costs to run our business on a
monthly and yearly basis.
If we have less revenue then expenses, what
does that mean?

Major Tools:
Balance Sheet
Income Statement
Cash Flow

Lemonade Inc.
We are going to need money and a legal corporate
entity to do it under.
1,000,000 Shares of Stock for $1 each to us the
founders
Sell another 500,000 Shares of Stock to an investor.

Lemonade Inc. Capitalization Table 
You $1,000,000 (67%)
Investor $500,000 (33%)
____________________________________________
Company worth $1,500,000 (100%)

Lemonade Inc. Balance Sheet
ASSETS
Cash 500,000 you’ve raised
Fixed Assets 0
Inventory 0
Goodwill 1,000,000 your $1 MM idea
Total Assets 1,500,000
LIABILITIES
Debt 0
Total Liabilities 0
Shareholder’s Equity 1,500,000
Per Share $1

Lemonade Inc. Fixed Assets
 
Tables and chairs 
Kitchen Equipment 
Computers/Cash Registers 
Signs 
 
Acquiring all these items cost us $50,000

ASSETS
Cash 450,000
Fixed Assets 50,000 deduct from the cash
Inventory 0
Goodwill 1,000,000
LIABILITIES
Debt 0
Total Liabilities 0
Per Share $1

Water 
Lemons 
Sugar 
Cups 
Napkins 
Containers (to hold lemonade) 
 
We project we will sell 800 cups a day. The
inventory above costs us $2.00 per cup.
800 cups X 30 days X $2 a cup = $48,000
Lemonade Inc. Inventory (Cost of Good Sold)

ASSETS
Cash 402,000
Fixed Assets 50,000
Inventory 48,000 deduct from cash
Goodwill 1,000,000
LIABILITIES
Debt 0
Total Liabilities 0
Per Share $1

We sell 800 cups a day for $4.50 a cup.
800 cups X 30 days X $4.50 a cup = $108,000
Lemonade Inc. OPEN FOR BUSINESS!!
THIS STRATEGY = WHAT COMPANY?

Lemonade Inc. Income Statement
REVENUE
Cups sold per month 24,000
Price per cup $4.50
Revenue $108,000
UNIT ECONOMICS - LET’S FIGURE OUT
HOW MUCH PER NEW CUP SOLD

Lemonade Inc. Income Statement
REVENUE
Price per cup $4.50
Revenue $108,000
EXPENSES
COGS $48,000
Labor $
COST OF GOODS
SOLD

Open 7 days a week, 8 hours a day 
8 hours x 7 days a week x 4 weeks= 224 hrs per position 
 
We pay, on average, $30.00 per hour per person. This
includes health insurance, paid time off, retirement
account contribution etc.
We need 5 people at all times to properly run the
business.
224 hours x $30.00/hrs x 5 people = $33,600
Lemonade Inc. Labor

Lemonade Inc. Income Statement Month 1
REVENUE
Price per cup $4.50
GROSS REVENUE $108,000
EXPENSES
COGS $48,000
Labor/Beneﬁts $33,600
Marketing $10,000
Rent $10,000
Other $2,500
EBIT $3,900
Tax $1,365
NET INCOME $2,535

Gross Revenue $108,000 = 1.88%
Net Income $2,035
Lemonade Inc. First Month Proﬁt Margin
HOW ARE WE DOING?

Lemonade Inc. With $500k investment
You $1,000,000 (67%)
Investor $500,000 (33%)
____________________________________________
Company worth $1,500,000 (100%)

ASSETS
Cash 402,000
Fixed Assets 50,000
Inventory 48,000
Goodwill 1,000,000
LIABILITIES
Debt 0
Total Liabilities 0
Per Share 1
STILL HAVE 402K IN
THE BANK

Lemonade Inc. 
You $200,000 (62.5%)
Investor $120,000 (37.5%)
____________________________________________
Company worth $320,000 (100%)
WHAT IF WE RAISED LESS?

ASSETS
Cash 120,000
Fixed Assets 0
Inventory 0
Goodwill 200,000
Total Assets 320,000
LIABILITIES
Debt 0
Total Liabilities 0
Shareholder’s Equity 320,000
Per Share $1
WE’D HAVE A VERY
DIFFERENT BALANCE
SHEET

ASSETS
Cash 22,000
Fixed Assets 50,000
Inventory 48,000
Goodwill 200,000
Total Assets 320,000
LIABILITIES
Debt 0
Total Liabilities 0
Shareholder’s Equity 320,000
Per Share $1
RUNNING LEAN.
TOO LEAN?

ASSETS
Cash 402,000
Fixed Assets 50,000
Inventory 48,000
Goodwill 1,000,000
LIABILITIES
Debt 0
Total Liabilities 0
Per Share 1
LET’S GO BACK TO OUR
HIGHER CAPITALIZED
STRUCTURE

ASSETS
Cash 402,000
Fixed Assets 50,000
Inventory 48,000
Goodwill 1,000,000
LIABILITIES
Debt 0
Total Liabilities 0
Per Share $1
Costs about $100k  
to start a new store
LET’S ADD GROWTH

Lemonade Inc. Growth Assumptions
Model out:
Open 1 new store a year 
Increase price by 15 cents a year
LOOK FOR STARBUCKS
GROWTH ASSUMPTIONS

Lemonade Inc. Pro Forma Income Statement
Year 1 2 3 4 5
REVENUE
Cups sold per year 288,000 576,000 864,000 1,152,000 1,440,000
Price per cup 4.50 4.65 4.80 4.95 5.10
GROSS REVENUE 1,296,000 2,678,400 4,147,200 5,702,400 7,344,000
EXPENSES
COGS 576,000 1,152,000 1,728,000 2,304,000 2,880,000
Labor/Beneﬁts 403,200 806,400 1,209,600 1,612,800 2,016,000
Marketing 120,000 240,000 360,000 480,000 600,000
Rent 120,000 240,000 360,000 480,000 600,000
Other 30,000 60,000 90,000 120,000 150,000
EBIT 46,800 180,000 399,600 705,600 1,098,000
EBIT Margin 3.61% 6.72% 9.64% 12.37% 14.95%
Tax 16,380 63,000 139,860 246,960 384,300
NET INCOME 30,420 117,000 259,740 458,640 713,700
Margin 2.35% 4.37% 6.26% 8.04% 9.72%

Lemonade Inc. Balance Sheet as of Dec 31st
Year 1 2 3 4 5
ASSETS
Cash 432,420 451,420 613,160 973,800 1,589,500
Fixed Assets 50,000 100,000 150,000 200,000 250,000
Inventory 48,000 96,000 144,000 192,000 240,000
Goodwill 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Total Assets 1,530,420 1,647,420 1,907,160 2,365,800 3,079,500
LIABILITIES
Debt 0 0 0 0 0
Total Liabilities 0 0 0 0 0
Shareholder’s Equity 1,530,420 1,647,420 1,907,160 2,365,800 3,079,500
Per Share 1.02 1.10 1.27 1.58 2.05
BY DOUBLING CASH YOU’VE DOUBLED SHAREHOLDER’S EQUITY

Lemonade Inc. Cash Flow
Year 1 2 3 4 5
Cash Flow for Operations
Net Income 30,420 117,000 259,740 458,640 713,700
Cash Flow from Investing
Capital Expenditures 50,000 50,000 50,000 50,000 50,000
Cash Flow from Financing
Money Borrowed (Debt) 0 0 0 0 0
Dividends Paid 0 0 0 0 0
New Shares Issued 0 0 0 0 0
Beginning Cash 0 -19,580 47,420 257,160 665,800
Change in cash -19,580 67,000 209,740 408,640 663,700
Ending Cash -19,580 47,420 257,160 665,800 1,329,500

Lemonade Inc. Measuring Growth
5th Year Earnings Yield - 47.58% return 
As of the 5th Year, the business is earning
$713,000 on $1,500,000 invested.

Return on Invested Capital - 105% return 
As of the 5th Year, the business is earning
$1,579,600 on $1,500,000 invested.

Earnings Growth - 14.99% per year 
Grew from $1.02 a share to $2.05 a share

Accelerating Proﬁtability

Valuation
Twitter: 
700,210,000 Shares X 17.49 = $12.25 Billion

Valuation
Twitter: 
700,210,000 Shares X 17.49 = $12.25 Billion
Lemonade Inc: 
1,500,000 Shares X 1.00 = $1,500,000

Pro Forma for Your Business!
Income statement
Balance sheet
Cash Flow

Lemonade Inc.
We are going to need money and a legal corporate
entity to do it under.
1,000,000 Shares of Stock for $1 each
Sell another 500,000 Shares of Stock to an investor.

Lemonade Inc. 
You $1,000,000 (67%)
Investor $500,000 (33%)
____________________________________________
Company worth $1,500,000 (100%)

ASSETS
Cash 500,000
Fixed Assets 0
Inventory 0
Goodwill 1,000,000
LIABILITIES
Debt 0
Total Liabilities 0
Per Share $1

Business 101.1 class 9 NYU ITP

Business 101.1 class 9 NYU ITP

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