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Lesson 6. Agenda. Topics: Introduction to Entrepreneurship Building a Business Parts of a Business Model Case Study: Angry Birds Activity Business Model. Can you recognize these entrepreneurs ?. You’re Right!. Steve Jobs. Oprah Winfrey. Mark Zuckerberg. Mary Kay Ash.
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Agenda • Topics: • Introduction to Entrepreneurship • Building a Business • Parts of a Business Model • Case Study: Angry Birds • Activity • Business Model
You’re Right! Steve Jobs Oprah Winfrey Mark Zuckerberg Mary Kay Ash
Do you know any female entrepreneurs? Sandy Jen is is a co-founder of Meebo, a social media platform Gabrielle "Coco" Bonheur Chanel founded Channel Robin Chase is a co-founder and former CEO of Zipcar Caterina Flake is the founder of Flickr and Hunch
Think-Pair-Share: What does it take to be an entrepreneur? • What do you think are the personal characteristics of an entrepreneur? • What do you think it would take for you to become an entrepreneur when you are older? Think-Pair-Share
What does it take to build aprofitable business? Elements of a business plan: • Value Proposition • Market Size • Revenue Streams • Cost structure • Distribution Channels Review page 28 of the workbook for a list of terms.
Value Proposition • What value do we deliver to the customer? • Which one of your customer’s problems are you helping to solve? • Value propositions look like this: for (target customer) who (statement of the need or opportunity) (product/service name) is (product category) that (statement of benefit). • For example: For people without cars who occasionally need a car to run errands Zipcar is a car rental service that allows them to easily get a nearby car to use
Market Size • You want to build a business where there are enough people who would buy the product to make you $$$ • Who are all the people and organizations for which you are creating value? • These can be both paying and non-paying customers.
Market Size: Examples • Zipcars’ potential market is all people in the US with drivers licenses who don’t have cars and live near a Zipcar location • Google Search’s potential market is both all people with computers and smartphones that need to find data on the web (non-paying) and advertisers that want to put adds online (paying)
Profit = Revenue - Cost • Profit is the extra money that you have made, accounting for any costs incurred, at the end of the day • Lemonade stand example: • If you sell 20 cups of lemonade for $0.50 each, and each cup of lemonade cost you $0.10 (for the paper cup, lemons, and sugar) … • What is your revenue? • What is your cost? • What is your profit?
Revenue Streams • To be a business, you have to make money... The question is from whom, and how? • Possible revenue streams • Paid apps: many apps cost money to download • Some of these have both a free version supported by advertising, and a paid version with no ads • Advertising: some apps are free to use but the app maker gets money from advertisers (ex. Words with Friends) • In-game purchases: some apps have bonus items within the game that can be purchased with real money (ex. Farmville)
Cost Structure • What are the most important costs in your business? • One cost could be the cost of programming resources, although If programming by yourself, that cost would be your own time • If you were to turn this app into a real business, what else would you have to pay for? • Marketing, so that people know about your application • Costumer Service, in case your customers need help • Others?
Distribution Channels • How are you reaching your customers? • Which ones work best? Which are the most cost-efficient?
Case Study: Angry Birds • Angry Birds – a mobile phone application puzzle game
Think-Pair-Share: Angry Birds • Value proposition: What value do they bring to users? • Market: Who is their market? • Revenue streams: How do they make money? • Cost structure: What does the Angry Birds company (Rovio) have to spend money on? • Distribution channels: How do they distribute their app? (Where are all the different places where you can download/play Angry Birds?) Think-Pair-Share
Angry Birds: Value for users • Angry Birds frees people from boring situations and provides entertainment
Angry Birds: Market Size • Users that have a suitable device and are looking for entertainment through games • Users can play Angry Birds on iPhone, Android, Windows phones, or on the internet • By making themselves available on different platforms, Angry Birds can reach a very large part of their market
Angry Birds Revenue Streams • Advertising: People download the free app onto their phones • Paid application: People can download the ad-free version for $0.99 • In-app purchase: Users can pay $0.99 for the Mighty Eagle to pass certain levels • Angry Bird merchandise: At this point, they make more $ from merchandise than the game
Angry Birds Cost Structure • The game took $ 122,880 to program in total • Pay a cost to platforms: • Facebook, App Store, Android, Chrome web store, Google Play, Blackberry App World • Operations: • Rent for office building • Raw materials for merchandise • Salaries for Employees • Computers and Development Software Source: http://www.wired.co.uk/magazine/archive/2011/04/features/how-rovio-made-angry-birds-a-winner?page=all
Angry Birds Distribution Channels • December 2009, Angry Birds hit the App Store • Apple App Store, Android Market, Angry Birds Website, Facebook platform, Roku platforms • Stores for Angry Bird merchandise
Summary of a BusinessModel • Value Propositions • What value do you deliver to the customer? • Market Size • Needs to be enough people who will buy your app to make $ • Revenue Streams • If your app will be paid, how much will you charge for it? • If you will have in-app purchases, what will you sell and how much will they cost? • Cost structure • What are the most important costs in your business? • Distribution Channels • How are you getting your product to customers?
Activity: Business Model • In your workbook, write down the following: • What is your target market? • How big is your market? • What will your revenue streams be? • If your app will be paid, how much will you charge for it? • If you will have in-app purchases, what will you sell and how much will they cost? • Cost Structure? • Distribution Channels? Record your ideas in pages 19-20 of the workbook
Task List • Complete the business model for your app. You’ll need it for your business plan. • Continue to work on the functionality of each individual screen in your prototype, starting with the easiest components.