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Section 1
For the purposes of this assignment, we choose to launch he portable mobile charger. Since we are in the pre-launch phase, there are many sources of funding which can be utilized. Funding forms the most critical element for any innovative start up idea. For example in the U.S.A., about 17% of businesses do not have access to funding (Legros et al., 2013).
Once the idea is established and the business objectives are evolved, it is important to set in to motion the process of fundraising. It is a very important step in the overall development of the business plan (Entrepreneur, 2016). It is one of the key steps to manage the launch and growth of the start up. Critical to this step is the identification and pitching to investors. The type of funding and the investor will vary according to the business objectives and the strategy for the start up.
The funding of a startup also involves tremendous risks and tasks which need to be executed and managed. Many of the issues relate to planning for the finances. There will be an apportioning of costs associated with fixed cost, variables, cost of business and so on. It is important for the start up to clearly demarcate the amounts of funds needed for a fixed amount of time.
The first thing to be considered is to allocate the amount needed for a specified time of operations – around 3- 6 months. A full cash flow plan is needed to fully understand the nature of costs and the revenue plans that will be put in action. These will tie-in very strongly with the initial business goals of the organization. The second factor to consider while doing a financial or funding plan is to evaluate the organizations position in the market and the state of the industry or competition. Products which are low in terms of initial capital costs need less funding compared to products that need high capital inputs. The quantum of funding will therefore depend on these factors. Competition will play a key role to determine the various barriers to entry in the segment or industry.
Segments which have a high concentration of existing players and competitors who have launched earlier and well- entrenched will be a formidable challenge to beat. To compete with established products or brands the funding for marketing and promotion will improve significantly. Another key factor is the reputation of the founding members of the startup. Many financiers and investors will seek to reduce risk by investing in startups which have founders who are experienced to some extent in business and industry.
Section 2
Given all these factors and considering that the business is in the pre-launch phase, the recommendation is to bootstrap the business to begin with. The bootstrapping strategy will ensure that initial risks are lower, selling the idea and concept is simpler and there is support available in terms of feedback and strategic inputs from core friends and family.
It will also enable the startup to test the viability of the idea given the nature of immense competition in the segment from power banks and re-chargeable products. To ensure that family and friends are equipped with full information on the business plan, the best way is to devise and present an overall business plan, opportunity, returns, timelines and share with them periodically the functioning metrics of the business. This will ensure ethical management of the business and clarity to investors.
For the launch of the Disposable Mobile Charger, there are many cost inputs needed. One pertains to the patent and technology followed by costs of production (factory, machinery, labor, distribution, packaging, sourcing of raw materials and so on). In addition there will be costs for licensing and establishing the business with appropriate government authorities.
Once the fundamentals of the business plan are established, the costs of actual manufacture and variable costs such as employee salary, marketing and promotions, cost of operations – water, electricity, machine maintenance and running costs will be incurred. It is clear that a bootstrapped startup will need to cost out all these factors efficiently and not venture in to high spending in the initial stages. The recommendation is to invest basic amounts to start a pilot product and test it in the market. Based on initial customer responses and feedback, a go or no-go decision can be then made.
Section 3
As per the Business Model Canvas (Osterwalder & Pigneur, 2010), the key element of the plan should be the way in which an organization “creates, delivers and captures value”. In the case of the Disposable Mobile Charger there are many elements of the model that can be adapted. According to the building blocks of the plan, we will tailor the model for our product.
Value Propostion: The core value proposition for the product is the newness and convenience that the product offers. Instead of carrying heavy power banks and other rechargeable batteries, the disposable charger provides a new way to charge phones on the go and is also convenient.
Target Customer: We will target heavy users of expensive smartphones who find a need to be online through the day. The core target will be young professionals and people (executives) on the move who do not get time to charge their phones.
Customer Relationship: We will establish customer relationships by using social media and communities to help spread the core value proposition of the product. The product interfaces will not be complicated and we do not envisage use for any formal instructions.
Distribution: Our distribution strategy will be unique and focused on inexpensive product selling. We will create indirect ways of distribution channels using partners who sell smartphones and accessories. We will also tie-up with key brands like Apple and Samsung to help bundle the offers.
Revenue Streams: Revenue will be primarily through asset sales through various distribution outlets or channels. Since it is a disposable product, licensing fees or usage fees do not apply to our business plan.
Key Activities: Primary activities will involve the use of supplier raw materials, production, testing and distribution. We do not envisage major investments needed for customer service since the product usage is simple.
Key Resources: The key resources needed for the successful launch and growth of the business include financial capital, human capital, intellectual and real property. IP will need some investment to ensure protection of the main idea. Human capital and finance requirements will be low initially but can scale up as the business grows. Physical property as a factory unit is needed to produce the disposable charger.
Key Partners: We will engage and build partnership with telecom and phone industry associations to spread the word about our product. In addition strategic partners will be brands like Apple and Samsung who have maximum reach and market share in the phone segment.
Cost Centers: The business will have a mix of fixed and variable costs. Fixed costs include capital cost of factory and machinery, utilities, salaries, marketing and distribution, packaging, logistics and other overheads while variable costs will include the cost of raw material and production.
We will need to ensure the high growth rate for the startup. Initially we will use our internal growth strategy followed by an external strategy. An average growth rate of 5-7% per week is considered good for startups (Maltz and Saljoughian, 2013). Any growth higher than that is called exceptional. We will target a growth of 5% per week considering the newness of the product and the life cycle.
A startups growth will be dependent on industry growth, employee capabilities, customer type and source of proper working capital (Gutenburg, 2016). For market penetration and geographical expansion, we will initially rely on our strategic partners. We will ensure penetration by bundling of the product with new phone sales. In addition to this we will promote our product on social media like LinkedIn and also events pertaining to industry.
Exit Strategy: Our key goal is to build and scale this business for a period of 1-3 years depending on the growth cycle and then exit the business by offering it as an ownership transfer. This decision will be made based on growth stage, revenues, employee considerations and profitability.
References
Entrepreneur. (2016). Know the importance of fundraising and funding for startups.
entrepreneur.com. Retrieved from: https://www.entrepreneur.com/article/278450.
Gutenburg. D. (2016). What’s a good startup growth rate?. foundmag.com.
Retrieved from: https://foundrmag.com/startup-growth-rate/.
Legros. M., Karuranga. E. G., Lebouc. M., and Mohiuddin. M. (2013). Ethnic
Entrepreneurship In OECD Countries: A Systematic Review Of Performance
Determinants Of Ethnic Ventures. International Business & Economics Research Journal, 12(10), 1199-1216.
Maltz. J. and Saljoughian. P. (2013). How Fast Should You Be Growing. techcrunch.
Retrieved from: https://techcrunch.com/2013/08/24/how-fast-should-you-be-growing/.
Osterwalder. A. and Pigneur. Y. (2010). Business Model Generation. Hoboken, N.J.: John
Wiley.
