Unit-IV: Growing Revenues

Identifying Growing Revenues,

Stabilizing growing revenues,
Developing additional revenues (licensing and
franchising).
Exploring New channels and Partnerships for
growth revenues.
Evaluating the Growth streams based on longevity.
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Lean Startup Canvas.
Identifying Growing Revenues

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 Understanding how to grow business and increase
revenues is vital in the first year of a new business,
especially in an uncertain economy. 
Understand these two things:
1. The figures you calculate must be based on factors you
know going in. Therefore, things are subject to change.
2. You are not predicting future success, but rather
weighing the possibility of risk vs. profits.
3. Keep this in mind and don’t make any concrete promises
to investors.
Some Basic Steps Identifying Growing Revenues
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 Step 1 – Total Available Market (TAM)

 Step 2 – Served Available Market (SAM)
 Step 3 – Gaps in TAM vs. SAM
 Step 4 – Rate of Adoption
 Step 5 – Resources to Launch
 Step 6 – First Year Sales Generated
Step 1 – Total Available Market (TAM)
4  The total available market refers to the amount of the
identified consumer or business market that will be
receptive to your offering.
 You may be looking at a large sector of a specific industry,
or a sub-set of a market that your niche product can satisfy
an unmet need. Get a picture of who your target market is.
Step 2 – Served Available Market (SAM)
 The served available market is made up of your targeted
market of consumers or business owners who are already
getting their needs met by your competitors.
 You must carefully look at this number and research what
they are receiving and where there are unmet needs, if you
want to get these prospects away from your competition.
Step 3 – Gaps in TAM vs. SAM
5  This step compares your TAM data with your SAM data,
also sometimes referred to as a SWOT analysis.
 In this exercise, you will begin to identify the prospects who
have unmet needs or are not currently using a comparable
product or service that you can offer.
Step 4 – Rate of Adoption
 A startup business can expect that things may take time to
ramp up before any real income is generated.
 On average, the rate of adoption by prospects can take as
long as 12 to 18 months.
 Have a plan in place to keep the business afloat during this
time. You could maintain a day job or bring investment
partners on board.
Step 5 – Resources to Launch
6  You’ll need many resources in the first year of a startup.
 Factor in time, materials, staff, and office rental fees you
will require to get going.
 Also, look at administrative costs and marketing resources
you’ll require to launch.
Step 6 – First Year Sales Generated
 Now that you have the first 5 steps completed of your
forecasting plan, you’ll be ready to start reaching out to
your prospects in a concentrated sales effort.
 Determine how you will sell to your targeted market, and
how many you will contact in the first 12 months of being
an entrepreneur.
Stabilizing Growing Revenues

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 One of the biggest challenges of running a startup is
maintaining a steady stream of revenue. 
 When you first get started, you won’t have any
customers, and you’ll rely on your initial capital or lines
of credit to make most of your purchases.
 These financial establishments will only take you so far,
however; you don’t have infinite capital to work with
and your lines of credit have a hard limit.
 Plus, you’ll be paying interest on whatever debts you
accrue.
The Importance of Stability

8  Even in a volatile business, or one in its infancy, you’ll

see revenue coming through in fits and spurts.
 For example, you may be able to land major client deals
on occasion,
Steady revenue allows you to:
 Make predictions: Inconsistent bits of revenue don’t
allow you to chart a vision for the future, which makes it
difficult to make decisions in the present.
 Budget your purchases: Knowing exactly how much
money you have to work with can help you budget more
effectively, controlling your costs and staying within
your means on a consistent basis.
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 Set more accurate long-term goals: With stable

revenue coming in, you can chart your future growth
and make better plans for the future accordingly.
 Create better experiments: With a steady stream of
revenue, you’ll have a consistent benchmark. Then, as
you create new marketing initiatives or make business
changes, you’ll be able to more accurately measure
how they affect your results.
How to Stabilize a Revenue Stream

 These are some of the best strategies you can use to keep
10 your revenue streams steadier:
1. Set up monthly agreements and retainers
 For starters, you can improve client retention and establish
reliable monthly payments by getting your clients set up on
monthly plans and retainer programs.
 For example, if you’re in the repair industry, you could
establish monthly maintenance schedules for your
customers. 
2. Use partnerships or consignments to win new sales
 Securing new sales regularly is a big part of keeping your
revenue stream full, but sales can be a tricky and
unpredictable area.
 For example, If you choose your partners wisely, you could
earn a steady stream of new customers.
3. Establish multiple lines of revenue
11  One of the easiest ways to stabilize your incoming revenue is
to establish more than one stream.
 For example, if your main line of business is selling
professional consulting services, consider also selling
“premium” content you’ve written, such as eBooks or
whitepapers, for a few dollars per download
4. Make passive income
 You can also opt to make more passive income; this is revenue
you don’t have to specifically work for.
 Some of the examples we’ve listed already qualify as passive
income.
 for example, selling a monthly subscription for use of your
software or reaping the profits from downloadable content don’t
require any new effort every month, but still make you money. 
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5. Focus on output, with minimum viable products
 If you want to hit your revenue goals,, you need to
focus on output—that is, focus on getting your
products and services in the hands of more people. 
 This will help you establish a small, but stable
revenue stream early on, which will give you a
fantastic foundation to work from later.
Developing additional revenues (Licensing and Franchising).

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 The term licensing we mean a business model in which

the licensor grants the right to use intellectual property,
brand or produce a company’s product to the licensee,
for royalty.
 The licensee company then makes a huge capital
investment to commence its operations.
 The greatest advantage of licensing model is that the
licensee bears the developmental cost and the risk
associated with launching foreign operations.
Franchising
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 Franchising as a strategy mainly used by service
companies, that allows the franchisee to use a business
model, processes or brand name for a fee, to conduct
business, as an independent branch of the parent
company (franchisor).
 As in the case of licensing, the franchiser does not bear
the development cost and the risk of commencing
operations overseas, because such costs are expected to
be borne by the franchisee only.
 The best examples of this arrangement are McDonald
Restaurant and Kentucky Fried Chicken of United
States that entered India through this strategy.
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 Although there is a big disadvantage of this
arrangement, lack of quality control, a basic belief of
franchising is that the brand name indicates its quality
to consumers.
 This is due to the geographical distance and the
increased number of franchisees.
 To overcome this problem franchisers set up joint
ventures or wholly owned subsidiaries to maintain the
standard quality in their products and services.
Key Differences Between Licensing and
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1. Licensing is an arrangement in which a company
(licensor) sells the right to use intellectual property, or
produce a company’s product to the licensee, for a
negotiated fee i.e. royalty.
2. Franchising is an arrangement in which the franchisor
permits the franchisee to use business model, brand
name or process for a fee, to conduct business, as an
independent branch of the parent company (franchisor).
3. Contract Law governs, licensing whereas franchising is
regulated, franchising regulations in many countries, but
in case the franchising regulations are not in place then
the company law regulates.
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4. Licensing does not require registration, whereas
registration is a must in the case of franchising.
5. In franchising, complete training and support are
provided by the franchisor to franchisee which is absent in
licensing.
6. The licensor has control on the use of intellectual
property by the licensee but has no control over the
licensee’s business. However, the franchisor exerts
considerable control over franchisee’s business and
process.
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7. In licensing, there is a one-time transfer of property or
rights, but in franchising involves the ongoing assistance of
franchiser.
8. A substantial measure of fee negotiation is there in
licensing. Conversely, standard fee structure exists in
franchising.

 In general franchising is comparatively stringent than

licensing because usually, franchisers set strict rules,
regarding the operation of the business by the franchisee.
Exploring New channels and Partnerships for growth revenues.
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Step-by-step through the process of building lasting and profitable

relationships with channel partners.
Step 1. Selecting Partners
 It all starts with choosing the right partners. To focus on cultivating
the right relationships, we need to define the ideal partner profile.
 He ideal customer profile.
 We would ask these questions:
 Are they ready? (do they have the resources to invest in the
partnership?)
 Are they willing? (will the partnership help them reach their goals?)
 Are they able? (is there a technical fit? a competence fit?)
 Do we have similar values? (is there a culture fit?)
Step 2. Discovery
20  At this step we are looking at what the potential partner is
already providing and what the customer’s ideal outcome
is. If there is a gap – can a partnership help fill this gap?
 Talk to your potential – and existing – partners to get a feel
for what matters most to them. Some questions to ask are:
 What is important to you in a partnership?
 What are the major growth drivers of your business?
 What is your unique value proposition to the customers?
 What are you struggling with?
 Who are your best customers?
Step 3. Setting Goals and Outlining Commitment
21  Once everyone is on the same page, the next step is to outline
the commitment for both parties 12 weeks out:
 What is the partner going to do?
 What are you going to do?
 Are the commitments realistic?
 Do you have everything to deliver them?
 Are there any potential barriers?
Step 4. Facilitating Introductions
22  Partners can be a source of valuable product feedback –
connect them with product managers and engineers for
feedback from the front lines.
 Often you will find that a lot of internal negotiation and
positioning of the partner program is needed to make sure
your organization is willing to work with the partners.
Step 5. Enablement
 “If you don’t put it in, you don’t get it out” applies in
partnerships.
 Companies can empower channel partners in 3 key areas:
technical training, building industry expertise, and sales
training.
Step 6. Sales Support and Account Management
23  There are a few key things we can do to make sure our
partners’ experience is closer to the best case scenario:
 Always give the partners a heads up, share information
about the prospective customer and help tailor the pitch to
this particular customer.
 Identify roadblocks partners face and provide strategic
recommendations, make sure that the company is
providing the required support.
 Work hand in hand with the partner to make customer
success a continuous process.
Step 7. Evolving the Partner Program
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 Even if things are working, there is always room for
perfection.
 By taking ownership of the program and making an
honest commitment to never-ending improvement, we
can take things to the next level.
 Valuable ideas can come from partner feedback. Surveys,
1-1 interviews via phone or Skype, in-person chats at
events can help evaluate the health of a relationship and
tease out process optimization opportunities.
Evaluating the Growth streams based on longevity.
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 Startups are full of promise and excitement, but the flip side
is, they’re also full of risk and uncertainty. The ten most
critical ones.
1. The Idea
 The strength of the founder's idea might seem to be the biggest
factor responsible for a business’s success, but it’s really only a
small element of how things might turn out.
 Consider Google, whose core idea of an interactive web
search was, at its start, already being implemented by dozens
of competitors.
 But because Google's plan, execution and timing were
superior, their lack of originality didn’t cripple their chances of
success.
2. The Leader(s) 
26  Leadership is important in startups. Leaders make the
decisions, set the vision and inspire people to work harder
for a groups goals. 
3. The Team
 Entrepreneurs are important, but they rarely accomplish
great things alone.
 Successful businesses employ anywhere from a handful
to hundreds of people, and those people will be the ones
maintaining the business, driving innovation and
executing your high-level goals.
 Hire the right people for the job, and you’ll never have a
problem.
 Hire the wrong people and your best-laid plans might be
ruined.
4. The Capital
27  Working capital is important; so are your early stages of
funding.
 Don’t panic if you can’t find an investor -- personal and
familial investments are possibilities.
 And don’t rule out the possibility of opening a line of
credit. 
5. The Plan 
 The plan has to involve more than just your core idea. It
includes your goals, your targets, your operations and more.
6. The Execution
 That being said, a plan is only as valuable as its ability to be
executed. If you have a great plan, but botch its execution,
your entire enterprise could be compromised. 
7. The Timing
28  Timing is important from a competitive perspective, and
it’s led many businesses to prominence despite a chaotic
and busy market at their time of entry.
 When YouTube came on the scene, for example, there
were already dozens of video-streaming platforms.
8. The Crisis Response
 No matter how well you plan or how hard you work,
something is going to go wrong. 
 How you respond to a crisis is far more important than
how likely you are to avoid one.
9. The Marketing
29  How you package and market your business matters.
 An inferior product that’s branded in a more appealing,
exciting, and unique way will always outsell its superior
product that happens to have plain, non-memorable
branding.
 This point may seem superfluous, but it critically affects
customers’ buying decisions
10. The Growth
 Finally, the path you choose toward growth plays a
significant role in how you end up.
 Grow too fast and you’ll stretch yourself thin.
 Grow too slowly and you’ll never get anywhere. So, find a
balance, and treat your growth carefully.
Lean Startup Canvas.

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 Lean Canvas is an adaptation of Business
Model Canvas by Alexander Osterwalder which Ash
Maurya created in the Lean Startup spirit (Fast, Concise
and Effective startup). 
 Lean Canvas promises an actionable and entrepreneur-
focused business plan. It focuses on problems, solutions,
key metrics and competitive advantages.
 Lean startup is an approach to building new businesses
based on the belief that entrepreneurs must investigate,
experiment, test and iterate as they develop products.
 A Lean Startup is nothing but working efficiently by
31 minimizing wasted resources.
 The ultimate goal is to streamline the whole course of
action for bringing a big idea to market.
 Customers are clear as to what they want, but hypothesis-
testing is more valuable
 The Lean Canvas is also majorly meant for entrepreneurs
and not the customers, consultants, investors or advisors.
 It has no specific medium of implementation and you can
use it first and then shift to the Business Model Canvas or
either way.
 Problem- a problem box was included because several
businesses do fail applying a lot of effort, financial
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resources and time to build the wrong product. It is
therefore vital to understand the problem first.
 Solution- once a problem has been recognized the next
thing is to find an amicable solution to it. As such, a
solution box with the Minimum Viable Product “MVP”
concept was included.
 Key Metrics- a startup business can better focus on one
metric and build on it.  The metrics include the range of
products or services you want to provide. It is therefore
crucial that the right metric is identified because the wrong
one could be catastrophic to the startup.
 Unfair Advantage- this is basically the competitive
advantage. A startup should recognize whether or not it
has an unfair advantage over others.
 There are a few other things that Ash Maurya omitted from
the original Lean Canvas in an attempt to improve it. These
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include:
 Key Activities and Key Resources- Ash found out that they
were more outside-focused when gauged with the
entrepreneur’s needs. They had also been covered in the
Solution box.
 Customer Relationships- a deeply focused startup business
should establish customer relationships from the beginning.
As such, these were covered in the Channels box.
 Key Partners- Ash removed this category regarding the fact
that most startups don’t require specific key partners when
putting up because they deal in unknown and untested
products.
 As such, it would be a waste of time trying to build such
relationships.
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