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Posts Tagged ‘new venture’

Is Your Revenue Model Automated?


The purpose of this element is to determine whether or not the company can automate the revenue model. Transactions and sales take time (time is money); even retailers spend a fortune on making checkout happen just a few seconds faster. For a business to successfully scale and grow, a turn key sales process will prove invaluable. If each transaction requires many human hours and long contractual negotiations then the revenue model will surely suffer.

Transactions that happen automatically without any human interaction (web sales) are certainly the most effective in terms of volume of transactions. The ability for a company to sell its wares at any time makes sure they are leaving no money on the table. A key to speedy growth is the ability for a business to sell their stuff 24/7/365.

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Quick simple transactions that make sense to the consumer are more likely to achieve smooth predictable growth than an overly complicated model or processes. If the transaction process is overly manual, time consuming or difficult, than even the best unit economics may start to break down quickly.

Some key questions we ask when taking an in-depth look at a new venture’s ability to automate their revenue model: Does the business have a long sales cycle (>90 days)? Can it make money quickly (<5 days) without any human interaction?

This is just one of the key criteria forward-thinking investors use when evaluating the strength of entrepreneurs and their new ventures. How do you measure up? Go to www.venturephenomeproject.com to read all 80 criteria and swap knowledge with other entrepreneurs & investors.

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While success is the favorable outcome for a new venture, it’s the return on investment that comes with that success that must inspect closely. In order to understand the potential return it’s important that one looks at the risk and potential upside that the business may have. The key to a strong overall investment opportunity is the ability for an investment to generate strong returns for the investors with minimized risk for downside. (Call it value investing if you want, but the key to profit is buying into a venture at the right price.) The profitability of a venture investment is influenced by; total funding requirements, the corporate structure, the existing shareholders, debt, valuation, type of financing instrument, liquidation preferences, partners, shareholder voting rights, legal issues, existing company assets, balance sheet protection, and the type and structure of board controls. This may be only one of 8 categories we look at in terms of identifying a solid opportunity, but it is by far the most important.

If this is what you see when you thinl LP, then you've got some work to do.

If this is what you see when you think LP, then you've got some work to do.

The purpose of this first element on this topic is to make sure that the company is formed as a legal entity and is in good standing with state and federal agencies. Some of this data will turn up in a simple background check, but this is more of a “pass or fail” element with some exceptions (i.e. acknowledgement of corporate structure issues and a very clear and rapid plan to fix the problem).

If you are unfamiliar with the basics of structuring a new business then your next stop should be at Michael Spadaccini’s article at Entrepreneur entitled “The Basics of Business Structure.” It’s a great resource that provide the pros and cons to each type of business structure and is a good place to start if you’re thinking about launching a new venture.

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This is just one of the key criteria forward-thinking investors use when evaluating the strength of entrepreneurs and their new ventures. How do you measure up? Go to www.venturephenomeproject.com to read all 80 criteria and swap knowledge with other entrepreneurs & investors.

Read Full Post »