Business 3: Business Model

Business 3

Business Model

This unit is only required for Senior Division teams, who will submit a business plan. However, Junior Division teams are encouraged to follow along with this unit to gain a better understanding of business development.

Learning Objectives

In this module, you will learn how to…

  • Develop a revenue model
  • Evaluate operational costs
  • Determine profit projections

How to Develop a Business Model

Businesses are successful when they are able to make enough money to support themselves and generate a profit. To achieve this, you’ll have to do some planning and develop a business model, which explains how you plan to make money (revenue). This is different from your business plan, which is includes much more information about how you’ll start you business. You’ll need to think about all of the costs of the different activities, resources, equipment, and materials that are needed to keep your business running and how it will make a profit after you pay all your bills. There are different ways to set up your business, as you saw in Business 1there are nonprofits, for profits, social enterprises, and many more. Think about what type of classification you would like your company to be while you start building your business model. Remember, no matter what kind of business you are in, revenue is needed to generate the long-term sustainability for your company.

There are a lot of different pieces to a business model, but we are going to stick to 4 main parts:

  1. Starting capital (seed money): initial money that is invested in your business to start your business
  2. Revenue model: a plan to receive money for your goods and/or services
  3. Operating costs: these include both variable and fixed costs you incur while operating your business. Things that you need to pay for that are constant are called fixed cost and things that change depending on other factors are called variable cost.
  4. Profit projection: the money you have left over after paying bills— how much you make in total. This “extra money” left over can also be reinvested (i.e. hire people, expand your workspace, etc.) back in your business so that you can grow it.

Starting Capital

You’ve got a great app idea that you’re developing and you’ve got a great brand. Now you’ve got to think of a way to make money and get your business started!

You’ll have to start looking for investors to help you raise money (or capital) to get your business started. This is also called ‘fundraising’. Investors would be making an investment in you and your product, and in return you would get money to start your business. Once you’ve gotten your business started, investors expect to get their money back plus an additional amount (or partial ownership of the company) for giving you the starting capital. This is known as a return on investment, or ROI.

There are many ways to raise capital for your startup. Here are a few examples:

  • Crowdfunding - a large group (crowd) of people give small funds that amount to a large sum. It gives a unique opportunity to get regular people to directly invest in them, but it’s not recommended for long term funding. It is also helpful if you have a large social media base to tap into.
  • Angel investor - very wealthy individuals who invest their own money early on in the business, but expect equity in exchange. Equity is like partial ownership, based on how much money they put into the company.
  • Venture capital - a group of professional investors (also known as a firm) who understand investing opportunities and risks in startup businesses. They do a lot of research to try and invest in startups that they think will become successful in the marketplace. The money they invest comes from a variety of sources.

All of the different types of investors accept a certain amount of risk with the hope of some reward over a certain period of time. This is the reason for their investment in the first place. They want to put in some money so that their money can grow through your business, but there is a possible outcome that they don’t get that money back. When you are developing your business plan, think about how you might use investors to build your plan, or if you'd want to use any crowdfunding resources to get your business off the ground. Keep in mind, this is optional!

Thought Exercise

Food Cart Example

Let’s think about a food cart business as an example. If you wanted to start your own food cart, you would need funding to get started. You could ask your parents to be investors in your business. When you ask your parents for the money, your parents will want to know:

  • How much money do you need?
  • What you are buying with the money they are giving you?
  • How much will they get back and when (return on investment, ROI)?

When you talk to investors, you will need to be prepared to answer some important questions. At the very least, they will want to know how much money you would need, understand how you will put that money to use, and what they will get back. This is where your business model will be important. Your business model should be able to answer their questions and more.

Let’s get started on your revenue model to start answering some of these questions!

Operating Costs

Before figuring out how much money you could make using your revenue model, let’s think about how much it takes to get there. This is where we have to determine the cost of all the things that are needed to run your business, or operating cost. There are many different kinds of costs that are involved. You’ll need to think about what costs you’ll have when you develop your app, which can include a variety of things that range from app store fees to a product you might sell through your app.

You can download our worksheet that you can use to get started. You might not need all the items listed and you can also try to cut some costs; for example your office space might be somewhere you can use for free.

Revenue Model

A revenue model is a description or plan of how your business will earn money. Revenue is the money that a business raises from its normal business activities, usually from selling products and services to customers. You will have profit once you subtract your costs from your revenue, which is the money you have earned and get to keep.

[Revenue] - [Operating Costs] = [Profit]

There are many ways to create revenue models, but for mobile apps, there are just a few options.

We've given a few examples below, and you can click on the icons to find out more!

One-Time Fee

Charge a one time fee to download an app providing a unique service.

For example:

Swype Keyboard

Mincraft

Heads Up!

In-App Purchases and Subscriptions

Selling goods, services, or special features. Also known as 'freemium', where consumers pay extra fees to access special features.

For example:

airbnb

Pokemon GO

Spotify

In-App Ads

Being paid banner or pop-up advertising (interstitial ads which are usually placed in between activities).

For example:

facebook

Yelp

2048

In order to get started and make some of these revenue calculations, you’ll have to refer back to the consumer research you did in the Market Research unit. Think about the kind of users you’ll have and decide whether or not they would pay additional money for the features you are developing for your app. Will you want to create revenue through selling the app, selling ad space, in-app purchases, or a combination of these?

When developing your revenue model, you’ll also want to include the pricing of the things you are asking for. How much is your app worth to your target customer (i.e. demand or appeal)? Or the ad space? Or each of the in-app purchases? How much do competitors charge for their app? Work with your team to decide what works best for your app. You can also refer back to the competitor analysis you did in the Market Research unit to help you answer some of these questions.

Study revenue models of similar apps to get a better idea of how you want your revenue model to be. A good thing to keep in mind is that a study in 2013 showed that most apps are free. They mainly rely on selling goods and services through in-app purchases. For example, in order to download the Minecraft app you have to pay a fee, but you also can buy extra items to play the game. Your revenue model can be very simple by selling your app only, or can be complicated with multiple ways of making money (these are also known as revenue streams).

Try to think about all of the complex situations that might happen when you have customers buy or pay for things in your app. Will you make enough money to support your business? If your operating costs are more than your revenue over a period of time, your business will not be able to make a profit and keep it running. Ask a mentor and/or work as a team to make these important decisions. For more ideas on different revenue streams for mobile apps, take a look here or here.

And if it’s a little confusing, let’s review what we learned with our food cart example.

Here’s a video on the different types of revenue streams if you are interested to learn more!

Thought Exercise

Food Cart Example

You would need to decide between one of the following options for how you would want to generate revenue for your food cart:

  • Paid app models sell each food item for a set price, and decide on the price
  • In-app purchases give away food, but sell condiments and larger plates at a set price
  • In-app ads give away free plates of food, but sell advertising space on the plates

Here are some resources that you can consult to help price your product:

Profit Projection

The last piece of your business model is the profit projection. First, let’s break this phrase down. Profit is the money you have left over after paying all of the bills you need to pay. Projection is an educated guess as to what you will have profited after a certain amount of time. Generally, the profit projection is the sum of all the calculations you had in your revenue model minus your total operation costs. You’ll calculate it by adding up the revenue and subtracting all the operation costs. Here's the equation as a reminder:

[Revenue] - [Operating Costs] = [Profit]

Remember, typically non-profits do not make profit, but they do make revenue to support their operating costs. If a non-profit makes a profit, that is likely to be invested back into the company.

In order to develop a projection, you’ll have to decide on how your business will grow. Do you expect more users buying the app? Or do you expect more users buying your in-app purchases? You’ll have to determine what factors will increase over time, or you’ll need to additional revenues from other sources. How much do you expect to make? There is a lot of uncertainty. Every business that is formed carries risk and uncertainty even after you have done your research and evaluation.

Here are a few guides that help you:

Create a Business Model

Now it’s time to put together your startup capital, revenue model, and operating cost to develop a business model. As a reminder, use the equation below to calculate your profit:

[Revenue] - [Operating Costs] = [Profit]

You can download our worksheet to use, or you can develop your own! Remember, your business model is only a very well educated guess on how you think your business will operate financially.

Reflect

Your business model is done. Congratulations! We’ve learned a lot of new terms in a unit. Let's review some of the key terms you’ll need to develop your business model:

  • Startup capital - initial amount of money that helps you get started, typically through different types of investors
  • Revenue - total amount of money you get from your business activities (like sales)
  • Revenue model - a plan on how to make money, or income
  • Operating cost - the money you need to spend that is needed to run your business.
  • Profit - the money you have left over after paying bills

When it comes to entrepreneurship, there are a lot of complicated things to think about-- and sometimes you don't even know the answer. Sometimes it takes educated guessing to get it right and to think on your feet. Here are a few questions to consider after you’ve accomplished your business model:

  • What needs to happen so your business is successful?
  • How much money is required to get your business started and generating revenue?
  • Did you think about more features to add to your app for your profit projection?
  • Why did you choose the revenue model you did?
  • How do you expect your business to grow?

Now you’ll be able to put your business model to work! In the next unit you’ll develop your business plan, where the business model will be a key part.

Additional Resources

 

Business 2: Market Research

Business 2

Market Research

Learning Objectives

In this module, you will learn how to…

  • Develop a consumer research plan
  • Ask the right questions for competitor analysis
  • Create a market research report for your app

Learn

When you have an idea and want to turn it into a business, it’s important for you to do some homework. You’ll want to understand how different things might impact your business and to see if there is a want or demand for your product. This is known as market research. Market research can be broken down into two parts: consumer research and competitor analysis.

Consumer research will help you understand the wants, needs, and beliefs of your target customer. By definition, a consumer is a person who consumes or uses something, while a customer is a person who has purchased something. In this case, we are going to use customer and consumer interchangeably. Your target customer is the person you are trying to sell to, or in other words the person who will be buying your products. It’s important to understand their perspective so you can create a mobile app that caters to them, so they will want to buy it. 

Competitor analysis will help you get to know your competitors’ strengths and weaknesses and how your company is similar and different from them, so you can start setting yourself apart from them. Competitors are companies making things similar to your app and are trying to sell them to the same target customers as you.

Here are a few questions to consider:

Consumer Research

  • Does your target consumer experience the problem your product solves?
  • Are consumers aware that they have this problem?
  • Would your target consumer pay for a solution like yours? How much would they pay?

Competitor Analysis

  • Is your solution the only solution to the problem?
  • What are some features your competitors offer? How can you stand out from them?
  • How much are your competitors selling their product for?

Thought Exercise

Think of some of your favorite apps or products. Who is their target customer? Who are their competitors?

Consumer Research

There are many different ways to get information about your potential consumer. Here are a few tools that you can use for your consumer research:

Interviews are a great tool to give you insight on the thought process of your potential user and help validate your idea. To perform an interview, ask a potential customer a series of questions either in-person, or over the phone. You can also ask them over email, but it helps to hear their voice and their reaction to your questions.

There are different types of interviews that you can use. Problem interviews are typically used to gather more information about the problem you are trying to solve, so you can design a better solution (in this case, your app). Solution interviews help you understand how a consumer or user might use the app you develop-- you’ll need to have something that you can demo or show when you interview. For more information on interviews, click here.

Here are a few examples of questions you might use for each type of interview:

Problem Interview Questions:

  • If your app existed, would people use it? How often?
  • What solutions does your consumer currently use?
  • Where is there a need for your app's features or your solution?

Solution Interview Questions:

  • Which features are most important for your app to have?
  • How much would people pay for your app?
  • Is your app a good match for the consumer?
Surveys

Surveys can help you gather more data quickly, however you will get less specific data than when you conduct interviews. They are typically a set of questions that are designed to gather specific information from a group of people.

You’ll need to think about how you want to design the survey: the type of questions you want to ask, the people you want to ask, and how you want to deliver the survey. If you are interested in learning more about survey science for market research, click here.

If you’re ready to get started on surveys or interviews, here’s an outline of all the things you’ll want to consider from start to finish. Also, take a look at the examples below. 

Product: Shazam

Survey Questions:

  1. Do you enjoy listening to music?
    • Yes or No
  2. How often do you hear music you like but not know its name or who performed it?
    • 1-10 scale where 1= Not Very Often, 10- Very Often
  3. May we contact you to talk more about a new music identification app?
    • Yes or No

Results (data gathered)

  1. 45 of 50 said "Yes", they enjoy listening to music.
  2. 22/50 reported a satisfaction of less than 5.
  3. 40/50 said "Yes" and left contact information.

Conclusions:

  • There is a good market size for the app.
  • Many people hear music they like but don't know the name of the song or who performs it.
  • People are interested in talking with us about a new music identification app.

Product: Angry Birds

Survey Questions:

  1. Do you enjoy Puzzle games?
    • Yes or No
  2. How satisfied are you with current options for mobile phone games?
    • 1-10 scale where 1= Not Satisfied, 10- Very Satisfied
  3. Can we contact you to talk more about this?
    • Yes or No

Results (data gathered)

  1. 30 of 50 said "Yes", they enjoy puzzle games.
  2. 12/50 reported a satisfaction of less than 5.
  3. 40/50 said "Yes" and left contact information.

Conclusions:

  • There is a good market size for the app.
  • Most people are fairly satisfied with their mobile game options.
  • People are interested in talking with us about a new game app.
Trend Research

Trend research will help you understand where the market has been and will give insight on where the market might go. There is already a lot of data that you can use to your advantage to get a sense of the market. There are many companies that are hired to do this kind of analysis! For example you can look at Gartner’s website, which is a leading information technology research and advisory company that forecasts the top 10 trends in technology. An alternate company is KPCB, which creates Mary Meeker’s report on internet trends. Here is a more digestible review of her very in-depth report.

Google Trends is a great resource for understanding interest in a specific topic. For example, you can see that Bangladesh has the most interest in mobile apps as an industry. Here is a helpful tutorial on how to use this powerful tool.

Competitor Analysis

Competitor analysis will help you recognize what makes your app more successful than others. You’ll have to take a look at other companies who are developing similar products (apps) as you to get an idea of their strengths and weaknesses, as well as compare and contrast their product(s) to your product. In the end, you’ll want to have a strong argument for why your app solves the problem better than your competitors. When doing your research, here are a few points that you should be looking for:

  • Branding & Public Image
    • How well known is the competitor?
    • Do they spend a lot of money on marketing?
    • What is their reputation for quality product & customer service? (Look at their reviews on Google Play)
  • Market, Pricing, and Revenue
    • How do they make money?
    • Where is their funding coming from?
    • How big is their user base?
    • How much does the app cost?
  • Technology
    • What kind of features does the app have?
    • What kind of features is it missing?
    • Do the features meet the customers' demands?
    • What concerns do users have from using their app?

It can be difficult to find this information, but here are a few places to look:

  • Look for relevant apps on the Google Play and iOS App Store
  • Use Google searches to find competitor apps & startups
  • Use Wikipedia articles about the startup/app to get stats on revenue, years in operation, size of team etc. (Whatsapp for example)
  • Use Google Trends to understand interest in a specific topic
  • Study competitors’ websites, social media, blogs, articles, sales material, white papers, and advertising to get a full picture of their success and strategy.

Create a Market Research Plan

Start building your market research plan! Outline your plan with all the necessary things you’ll need to create a strong market research report. With this report, you’ll be able to construct a strong argument in your business plan to show that your app is better than the rest! Here’s a worksheet to help you with building your plan.

Resources:

Apply

Start researching using the market research plan you developed. Utilize the resources that we have provided and look for a few of your own. Gather your information so you can make a strong argument on how your app is more innovative than the others that are out there!

Create your market research report, which will be added later your business plan. The report should be short, concise, and provide facts and figures that show your app will do well according to your research. Here are a few:

Reflect

Once you’ve conducted your market research, take a step back and think about what you’ve accomplished! You were able to perform consumer research & competitor analysis, and are develop a market research report. Now look back and ask yourself:

  • Do you feel well prepared and understand the market you are entering?
  • Are you going to make any changes to how you develop your app?
  • What are your strengths and weaknesses compared to your competitors?
  • What will be your selling points against your competitors? What sets you apart?

Additional resources

Business 1: Types of Businesses

Business 1

Types of Businesses

Learning Objectives

In this module, you will…

  • Learn about different types of businesses
  • Think about what type of business you want to create
  • Write a mission statement

What is a Business?

Understanding how to start and run a business is a very important part of being an entrepreneur! You’re starting to learn how to build your app and to think about the problem it will solve. Now it's time to think about your business.

What comes to mind when you hear the word 'business'? You might think of a local farm stand, a grocery store, a bank, or even a big social media company like Facebook or WhatsApp. A business is any organization or person that is doing something in exchange for money or another good. Businesses can make, buy, or sell goods (like a company that makes cars), or they can provide services (such as a mobile phone service company).

To run a business, you don’t need a storefront, a lot of employees, or even a physical product to sell. You don’t have to be a grown up to start your own business! There are plenty of young people who have started their own businesses. For example, Maddie Bradshaw started her business at the age of 13. She couldn’t find any school locker decorations she liked, so she decided to make and sell her own. She realized that the best person to understand what young people like and want to buy is another young person!

Different Types of Businesses

Not all businesses have the goal of just making money. Some have different goals such as helping feed hungry people, or providing students with a better education. Making a profit (revenues minus expenses) from their businesses over time, allows them to be sustainable.  In this section, you will learn about three types of businesses: for-profits, non-profits, and social enterprises.

Check out the table below to learn more about these three types of businesses.

 

For-profit
Social Enterprise
Non-profit
Goals Make Money

Earn profit while meeting a consumer or business need in society.

Make Money & Do Good  

Keeps some of the profit earned from doing something good, like social issues.

Make Money to do Good

Wants to do something beyond making a profit, like dedicated to furthering a particular social issue(or addressing a problem in their community).

Characteristics - Maximize profit by selling goods, products, or services to customers.

- May have a social mission (a goal to do good in the community) but it is not operated to maximize that.

- Can be structured as for-profit or non-profit.

- Maximize social impact and profit for external shareholders.

- Some of them make profit and use that profit to do social good.

- Making a social impact is the driving force in the business.

- Need money to sustain themselves and pay employees just like any other business.

- Can earn money by selling product and services, accepting donations, or get funding through grants.

Real Examples Bank of America 

HSBC

Verizon

Vodaphone

Kiva

Sanergy

TOMS

Thinx

Charity:Water

UNICEF

Red Cross

Khan Academy

So, if we think of our food cart example in each of these business models, it may look something like:

For-Profit Food Cart: You start your food cart with the main goal of making money by selling delicious food to people. You spend the money you earn on yourself and on improving your business and food quality.

Social Enterprise Food Cart: You start a food cart with the main goal of raising awareness of hunger in your community. You tell your customers that for every three meals you sell, you will give one meal to a person in need. You spend some of the money you earn on improving your business and food quality, some of it on yourself, and some of it on providing the meals for the hungry.

Non-Profit Food Cart: You realized that instead of running a food cart and donating the money you earn to the underserved community, you might make a larger impact if you helped kids from underserved communities run their own successful food carts. You get a donation from a local bank for your program. With this donation, you run a program called “How to Run a Successful Food Cart” in the community and help others succeed.

Social enterprise is a relatively new category for companies, so don’t worry if you're a little confused. For simplicity, think of social enterprise as being in between for-profit and non-profit business. It is up to the business to decide how far they want to lean to either side.

Want to learn more about social enterprises? Watch this video:

 

Here's a couple more videos about social enterprises:

For Thought

There are not always clear lines between for-profits and non-profits, but there might be different tax responsibilities depending on how the business is structured and restrictions on how it can spend the money earned. In most countries, all businesses need to pay a tax to the government. The amount of tax they have to pay is greatly impacted by what type of business it is.

For example, in the United States, if you are a non-profit, you do not have to pay as many taxes, and those who donate to you can get a tax break as well. However, it is not enough to just say you are a non-profit or a social enterprise. You will need to follow rules and prove that you are following them. Each country’s law and rules are different. It is out of the scope of this competition to check and follow these rules but they are something that you should keep in mind when starting a business outside of Technovation!

Real-World Examples

In the Ideation Unit, you were introduced to sustainable development goals

Let’s think about some real businesses that are trying to solve these challenges. What types of businesses do you think they are? Can you think of any additional companies that are helping the world?

Develop Your Mission Statement

As you develop your business during Technovation, you will likely realize that your company falls somewhere between for-profits and non-profit, with social enterprise being in the middle. That is completely okay. Your company will have the goal of solving the problem that you identify, but you will also want to generate revenue (money) so you can keep the business running or scale it up (grow its size and impact). One thing that will help you stay true to your original goal of your business is to always stay close to your company's mission statement.

A mission statement is a formal summary of the aims and values of a company, organization, or individual. Mission statements help companies determine what is important and  what is not, and clearly state who will be served and how. A mission statement is usually  short and simple sentence that outlines what the organization’s purpose is and how it accomplishes that.

Create a mission statement for your business with your team and share it with your mentor. Your mission statement can change as your company grows but remember that this is the “heart” of your business. Try to stay true to this statement.

Tip: If you are stuck, look at some other organizations tackling hard challenges. Look at their mission statements and see what you can learn:

  1. UNICEF: “UNICEF is mandated by the United Nations General Assembly to advocate for the protection of children's rights, to help meet their basic needs and to expand their opportunities to reach their full potential.”
  2. Kiva: “Kiva’s mission is to connect people through lending to alleviate poverty. We celebrate and support people looking to create a better future for themselves, their families and their communities.”
  3. Amnesty International: “Our vision is of a world in which every person – regardless of race, religion, ethnicity, sexual orientation or gender identity – enjoys all of the human rights enshrined in the Universal Declaration of Human Rights (UDHR) and other internationally recognized human rights standards.”
  4. Nike:"To bring inspiration and innovation to every athlete* in the world." The legendary University of Oregon track and field coach, and Nike co-founder, Bill Bowerman said, "If you have a body, you are an athlete."

Thought Exercise

When you are developing your mission statement consider the questions below and make sure your mission statement addresses all of them.

  • What do we do?
  • How do we do it?
  • Whom do we do it for?
  • What value are we bringing?

Decide on a Business Type

Now that you are more familiar with different types of businesses, it is time to start thinking about the business you want to build with your team. Answer the following questions:

  • What type of business do you want yours to be? (for-profit, non-profit, or social enterprise)
  • What do you want to accomplish by opening your business?
  • What do you want the mission to be?
  • What is your vision for the business?
  • How do you want your profit to support your mission?
  • How do you think you can sustain (keep it running) your business?

These are all questions you should ask when developing your business. You don’t need to have the answers to all these questions today but it is important to keep thinking of these as you build your business plan. You can always change the type of business as you further develop your app and business plan!

Reflect

  • Why do you think there are different types of businesses?
  • What do you think advantages of different types of business are?
  • What type of business do you think will be best in solving the community problem you are trying to tackle?
  • How do you think your mission statement can help your business?

Entrepreneurship 10: Looking at App Businesses

Looking at App Businesses

Entrepreneurship 10

Technovation and HSBC have teamed up to bring you this is a bonus lesson! This lesson is not mandatory to complete but will bolster your entrepreneurial knowledge.

In this lesson, you will...

  • Look at an example of a real life financial report and compare it to your own projections

Key Terms

  • Financial Report - Report of a company’s financial results that includes profits, costs, and revenue
  • Cost of Revenue -the total cost incurred to obtain a sale and the cost of the goods or services sold

A Case Study

Throughout the Entrepreneurship lessons, we have gone over many topics that will prepare you to be successful in the business world. Let’s see these concepts in action in the real world with one of the most famous app companies out there: Twitter.

Twitter’s Financial Report

Source: Twitter

Above is an excerpt of Twitter’s Financial Report. Specifically, it’s a summary of their financial data from 2015 to 2019. It’s a lot to look at! We’re going to be looking at a few specific points here, but make note of how many different metrics Twitter is tracking. Accurate data recording is a great help in making future decisions. With that said, let’s dive deeper.

 

The first highlighted line is Twitter’s reported Revenue. You learned what revenue was in Entrepreneurship 7. Do you remember what it is?

So we can see that Twitter made $2-3 million in revenue for each of these years. That’s pretty impressive! But let’s look at the next highlighted line: Net Income. You might know this more familiarly as Profit, which we discussed in Entrepreneurship 8. Do you remember what Profit means?

As you can see, Twitter actually had a negative profit for the years 2015-2017. Isn’t it a bit surprising to see from a very famous app company that made millions of dollars? There are reasons for how this works, but that’s a topic for another time. The point to take away here is that even big companies at Twitter can take a while to become profitable. With that said,  let’s see what some of Twitter’s expenses are.

These highlighted sections are Twitter’s Operating Costs. You’ll also remember this from Entrepreneurship 8.

Let’s explain each one so that we can see how Twitter spends its money.

Cost of Revenue

These are the direct costs incurred in order to make a sale. In the case of Twitter, this includes things like the cost of maintaining servers. Notably, this does not count indirect costs like the salaries of developers.

These types of costs account for over 30% of Twitter’s operating costs.

Research and Development

This is the cost of the creation of new products and features for Twitter.

Let’s make a note that about 20-30% of Twitter’s costs is devoted to future development. It’s important to plan for the future!

Sales and Marketing

This is the cost of the division involved with things like marketing, communication, and customer service. A lot of what goes into this cost is what we went over in Entrepreneurship 6!

Let’s also note that sales and marketing accounts for around 30% of Twitter’s costs.

General and Administrative

This is the costs for things like employees involved with roles outside of those mentioned above. For example, consultants and lawyers would be costs that fall under this category.

This accounts for about 10% of Twitter’s costs.

A simplified way to summarize Twitter’s operating cost is as follows:

  • 30% - Cost of Revenue
  • 30% - Research and Development
  • 30% - Sales and Marketing
  • 10% - General and Administrative

One way to think about these percentages is that it gives us some insight into how Twitter values spending money. One may say that for Twitter, it’s equally important to 1) maintain basic operations, 2) invest into future development, and 3) market their product to a growing audience.

Activity: Going Back to Your Plan

Go back to the work you did on this worksheet from the previous Entrepreneurship lessons. Reflect back on your thought process when you calculated your own Revenue and Profit and consider the following:

  • What was the reasoning behind the projected costs of running your business?
  • What was the reasoning behind your projected profit?
  • After seeing Twitter’s financial report, is there anything you would adjust?

You don’t need to imitate Twitter, but it’s good to see what some real life companies are doing!

Reflection

HSBC and Technovation believe in taking steps to better prepare you for your future. There’s a lot of lessons about entrepreneurship we can learn from many different sources, and real life being one of the best teachers!

You’ve also given a lot of thought into how you’ll market your app and create your business. As you finish all these Entrepreneurship lessons, remember that the most important thing is that this is one of many means to pursue your passion. You’re well equipped to venture into the world of entrepreneurship!

Additional Resources: A Further Look

Entrepreneurship 9: Business Plan

Business Plan

Entrepreneurship 9

Technovation has teamed up with the help of HSBC to bring you this lesson! This lesson will help you earn points in the entire Entrepreneurship section of the judging rubric.

In this lesson, you will...

This lesson is not mandatory for Junior Division, but Junior teams who want to learn more about building a business are encouraged to read it. Only Senior Division teams are required to submit a 5-10 page business plan.

Key Terms

  • Business Plan - a formal document that has important information about your company and how you will run it

The Business Plan

In this lesson, you will create a 5-10 page business plan. A business plan is a proposal about how you will run your entire company. It is a formal document that has important information about your company, your goals, and how you will achieve your goals. Think of it as a set of instructions that describes how and why you are building your business. It will incorporate many of the things you’ve already learned so far– you are just putting all of it together!

Watch this video to get more details about the parts of a business plan.

Parts of a Business Plan

Without a business plan, it is difficult to build a business. It’s like building a house without any blueprints. A plan outlines the roles, responsibilities, and future for your business.

Here are the parts of the business plan that you’ll need to submit. Remember, your business plan can include charts and images that help explain your ideas - it doesn’t have to just be words!

  • Executive summary – A short and concise description of your business.
  • Company description – Information on what you do, how your business is different from others, and who your business serves. Can include your mission and vision.
  • Products and/or service description – Define what products and/or services you sell, explain why it benefits your customers, and how your mobile app will be developed. Screenshots of how your app works could be useful here.
  • Market analysis – Give background on the market that you plan on entering. This is where you will include all of your market research, like consumer and competitor research, from Ideation Lesson 5: Market Research. Remember to include visuals like charts and graphs when you can.
  • Strategy & implementation – Here, you will explain how your business will run or operate for the next 3-5 years. This will be taken from your Branding and Business Model.
  • Financial plan & projections – This is a summary of how you will be spending money, making money, and using the money for the future, which is information you developed from your Business Model. Again, visual information is useful to help others understand your plans.

You can learn more about each section below and see some tips from HSBC.

Activity: Plan and Write your 5-10 Page Business Plan

Now that you know all the different parts of a business plan, you can prepare to write one! The business plan can be a lot of work, so ensure your team and mentor create it together. You can use this checklist to divide up the work and plan what to include. 

After you make a plan, it’s time to write your 5-10 page business plan

Reflection

Writing a business plan is a huge accomplishment, especially since you're still a student! Get excited, you are almost ready to submit!

After your mentor or your team have looked over the business plan as a group, make sure to incorporate their feedback. It helps to get different people’s point of view, since this is a document that might be read by all different types of people. Read your business plan as a group, and finalize your business plan by using the checklist to confirm you incorporated all of the different parts.

Additional Resources: Business Plans Examples

Entrepreneurship 8: Operating Costs and Business Models

Operating Costs and Business Models

Entrepreneurship 8

Creating a business model with accurate operating costs considered is one part of earning maximum points in the "Financial Sustainability" line of the judging rubric. It can also help with "Future Goals".

In this lesson, you will…

  • Figure out how much money it will cost to run your business 
  • Create your business model
  • Estimate how much profit you’ll earn over 5 years
  • Continue working on your business model worksheet

The business model that you’ll develop in this lesson will be necessary for the Senior division to complete their 5 page business plan. However, Junior division teams should still complete this lesson and talk about their business model in their pitch video.

Key Terms

  • Business Model - something that explains how you plan to make money and keep your business open
  • Profit - the money you have left over from your revenue after paying all of your bills
  • Profit Projection- how much profit you think your business will earn over many years
  • Investors - people who give you money to start your business and in return, get some of the profit you earn
  • Startup Capital - the initial amount of money that helps you start your business, typically given through different types of investors
  • Operating Cost - the money you need to spend to run your business.
  • Profit - the money you have left over after paying bills

Business Models

In this lesson, you’ll create a business model, which is something that explains how you plan to make money and keep your business open. This is a critical part of your business plan, because it is what will convince judges that your business is possible and that it can succeed into the future.

You already started your business model in the last lesson, when you figured out how much revenue your app will earn. In this lesson, you’ll calculate your operating cost which is the amount of money you need to spend to run your business.  You’ll need to think about the costs of the different activities, resources, equipment, marketing efforts and materials that are needed to keep your business running. 

Here are the main parts of a business model:

  1. Starting capital (seed money): initial money that helps you start your business
  2. Revenue: money you earn from selling your goods and/or services
  3. Operating costs: things you need to pay for to keep your business open
  4. Profit: the money you have left after paying for your operating costs. This “extra money” is yours to keep or reinvest (i.e. hire people, expand your workspace, etc.) back in your business so that you can make it bigger or better

You already calculated your revenue in the last lesson, now it’s time to focus on the operating costs so that you can calculate your profit using this equation.

[Revenue] - [Operating Costs] = [Profit]

Operating Costs

Let’s start by thinking about how much money it is going to cost to run your business. The things you need to pay to keep your business running are called operating costs. Here are some examples of operating costs:

  • Office spaces, computers, internet access
  • Payment for workers
  • App store fees
  • Marketing and advertising (think back to the marketing strategy you choose in Entrepreneurship 6)

When you calculate your profit, you will write down your estimated operating costs for the entire year. For example, let’s say you have two people working at your company, and you pay them $10/hour. Each week they work for 20 hours, and they work 50 weeks out of the year. 

Year 1: 2 people x $10 per hour 20 hours per week x 50 weeks per year $20,000 per year

However, after 1 year, you want to hire a new person to help you add new features to your app. For year 2, your calculation will look like this:

Year 2: 3 people x $10 per hour 20 hours per week x 50 weeks per year $30,000 per year

For the activity, you’ll fill out the worksheet so that you can add up how much it will cost to run your business each year. Keep in mind that you might not need all the items listed and that you can also try to cut some costs; for example, your office space might be a place that is free for you to use.

Profit Projection

The last piece of your business model is calculating profit for each year. Profit is the money you have after paying all of the bills you need to pay. Your profit is what you have after you subtract your operating costs from your revenue. It’s the money you have earned and get to keep. Profit Projection is how much profit you think your business will earn over many years. As a reminder, here’s the equation:

[Revenue] - [Operating Costs] = [Profit]

In the last lesson, you already calculated how much revenue you will earn with your app each year. In these three activities, you’ll calculate your profit by calculating your operating costs and subtracting them from your revenue.

Activity: Identify and Calculate Your Operating Costs

Identify and calculate the operating costs of building your app and running your business. 

Remember, you can the worksheet you used for Entrepreneurship 7. Now you will  fill out the operating costs section. 

Here are some categories that most operating costs will fall into. You might need to do research to figure out how much different items cost!

  • Equipment - This includes things like computers, desks and chairs.
    • Consider items like: What items do you need in a space for staff to do work? Do they need computer hardware?
  • Software - programs that help you design the app, manage data, or do other things your team can’t do on your own
    • Consider items like: Do you have to pay for use of different databases or other services to run your app?
  • Utilities - any rent you need to pay, internet costs, phone bills
    • Consider items like: How much does internet cost where you live? How much is rent for an office?
  • App store fees - This will include putting your app in the Google Play or Apple App Store.
    • Consider items like: How much does it cost to put your app in the Google Play or Apple App Store?
  • Marketing - Advertising in newspapers, printing fliers, using social media, etc.
  • Employee salaries - This includes how many staff you will have and how you plan to pay them
    • Consider items like: How much do you want to pay staff?

Your operating costs are likely to go up over time. Remember your revenue model from the last entrepreneurship lesson? If you decided to build a new feature or advertise your app more to make more revenue, your operating costs might also go up for doing this! Revisit the explanation for your revenue model and look for things that might also make your operating costs go up. 

For instance, if you decided to build more features, you might need to also hire more people to build them. Also, if you decide to advertise your app more, you need to spend more money on marketing.

Activity: Calculate your Projections

Now it’s time to put together your revenue model and operating cost to project your profits. For each year on the worksheet, use this equation to calculate profit. 

[Revenue] - [Operating Costs] = [Profit]

It’s okay if you have a negative profit in the first 2 to 3 years that you are in business. However, over time you want to make sure your profit goes up. If you are still in the negative by year 3, you need to revisit your revenue model or your operating costs. Maybe you are not quickly getting enough people to use your app, or maybe your operating costs are too high. 

Tip: If you want to include starting capital in your business model, please read the additional resources first before calculating your profit projection.

Reflection

Your business model is a very important part of your business. It is how you will convince judges and investors that your app is a good idea and is worth investing in. If you are in the senior division you can explain your business model in your 5 page business plan and in other elements of your work to ensure a strong submission. Both divisions should talk about their profit projection in their pitch video to convince judges their app and business are possible. What will you highlight in your submission?

When it comes to entrepreneurship, there are a lot of complicated things to think about, and sometimes you don't even know the answer. Sometimes it takes educated guessing to get it right. Here are a few questions to consider after you’ve accomplished your business model:

  • What needs to happen so your business is successful?
  • How much money is required to get your business started and generating revenue?
  • Did you think about more features to add to your app for your profit projection?
  • Why did you choose the revenue model you did?
  • How do you expect your business to grow?

Tip: Be sure to include this information in your submission - it’ll help judges understand your plan for success! In the next lesson, you’ll develop your business plan, where the business model will be a key part.

Additional Resources: Starting Capital and Business Models for Nonprofits

 

Starting Capital 

When you’re first starting out your business, you might need some money to get started.  This is known as starting capital. You might need to buy computers, hire people to help build your app, or rent an office space. All of this costs money, and you aren’t making money from your business yet. So how do you get this money?

Many businesses get this money by asking people to loan it to them. These people are known as investors.  Once you get your business started, investors expect to either get their money back plus more, or receive something else in exchange. Here are a couple of different ways to get people to invest in, or pur their money into your business. 

  • Crowdfunding - a large group (crowd) of people each give small amounts of money that add up to a larger amount. This allows regular people to directly invest in your business, but it’s not recommended for long term funding. These people usually get something in exchange, like 10 free downloads of your app. This can be especially effective if you have a large social media base to tap into.
  • Investors - wealthy individuals who invest their own money early on in the business, but expect equity in exchange. Equity is like partial ownership, based on how much money they put into the company. 
  • Venture capital - a group of professional investors (also known as a firm) who understand investing opportunities and risks in startup businesses. They do a lot of research to try to invest in startups that they think will become successful in the marketplace. The money they invest comes from a variety of sources.

All types of investors accept a certain amount of risk with the hope of some reward over a certain period of time. This is the reason for their investment in the first place. They want to put in some money so that their money can grow through your business, but there is a possible outcome that they won’t get that money back. When you are developing your business plan, think about how you might use investors to build your plan, or if you'd want to use any crowdfunding resources to get your business off the ground.

 

Starting Capital Example

Let’s think about a street food vendor business as an example. If you wanted to start your own street food vendor business, you would need funding to get started. You could ask your parents to be investors in your business. When you ask your parents for the money, your parents will want to know:

  • How much money do you need?
  • What you are buying with the money they are giving you?
  • How much will they get back and when (return on investment/ROI)?

When you talk to investors, you will need to be prepared to answer some important questions. At the very least, they will want to know how much money you would need, understand how you will put that money to use, and what they will get back. This is where your business model will be important. Your business model should be able to answer their questions and more.

Let’s get started on your revenue model to start answering some of these questions!

 

Including Starting Capital in your business model

Typically if you receive starting capita, it will be a large sum of money, all received during year one. You will then use this equation during that year to calculate your profit.

[Starting Capital] + [Revenue] - [Operating Costs] = [Profit]

 

Business Model for Nonprofits

If nonprofits shouldn’t make any profit, how do you design your business model? This is a very good question. Nonprofits still need to have a business model, but it will be a little different.

Nonprofits can still have revenue streams, and they may get a lot of their money from grants. But they can’t keep any of the left over money. Typically they will need to use this money to make their business better or to do more social good. They can pay their own workers more, or try to provide more of their services to the community, but their owners should not be pocketing the money for their own purposes.

Technovation is a nonprofit! If we have left over money from grants or from our revenue streams, we reinvest that money back in the community. We might put money into opening a new Technovation chapter, or hiring a new curriculum writer to improve the curriculum for our students. 

If your business has the potential to make a lot of money, but you still want to have a social mission, try making your business a social enterprise instead.

Entrepreneurship 7: Calculating Revenue

Calculating Revenue

Entrepreneurship 7

Technovation has partnered up with our friends at HSBC for this lesson! Calculating your revenue is one part of earning maximum points in the "Financial Stability" line of the judging rubric. It can also help with "Future Goals".

In this lesson, you will…

  • Learn about different ways to make money for your app
  • Calculate how much revenue your business will make over 5 years
  • Use this worksheet to complete your calculations

The revenue model that you’ll develop in this lesson will be necessary for the Senior division to complete their 5 page business plan. However, Junior division teams are still encouraged to complete this lesson and talk about how they will earn revenue in their pitch video.

Key Terms

  • Revenue - total amount of money your business earns
  • Revenue Model - a plan on how to make money
  • Total Market Size - how many people there are who could download your app
  • Market Opportunity - how many people you estimate will actually download your app

Revenue Model

At this point, you have a pretty good idea of what your business will be and how you will do some marketing for your app.  Now, it’s time to figure out how your business will make money. Remember, even nonprofits and social enterprises need to make money so that they can pay for all of their expenses.

In this lesson, you’ll calculate your revenue, which is how much money your business earns. In the next entrepreneurship lesson, you will figure out how much it costs to run your business, which is called the operating cost. Then you will calculate your profit, or how much money you have left over once you have paid for all of your expenses. 

[Revenue] - [Operating Costs] = [Profit]

Choosing a revenue model

Revenue is the money that a business earns, usually from selling products and services to customers. For mobile apps, there are three main ways to earn revenue. Keep in mind that you can use a combination of the three, like having in-app ads and paid features.

One-Time Fee

Charge a one time fee to download an app providing a unique service.

Minecraft costs $6.99 to download

Mini Metro game costs $0.99 to download

In-App Purchases and Subscriptions
In-App Ads

In order to help your team decide which revenue model to use, refer back to your market research from Ideation 5. Think about your users and whether or not they would pay additional money for features in your app. Research how your competitors charge for their apps and additional features. 


 

Calculating your revenue

 

1. Calculating your market size

You can complete the activity "Choose a Revenue Model" below as you learn about this information.

To calculate your revenue, you first need to estimate your market size, or how many people could download your app. For example, let’s say we are making an app that will help high school students apply to college in the United States. Our market size would be the number of high school seniors in the United States. We found that 3 million students graduated high school in 2016 and around 70% of them applied to college. So, our potential market size is huge: 2.1 million students!

3 million high school seniors x 70% going to college =  2.1 million potential users

We don’t really expect that 2.1 million students will download our app, and there are many reasons for this. They may not want to use our app, or they may already use one of our competitors. They also won’t know about it, or may not have mobile phones. To determine around of people who you could reasonably expect to be interested in your app, you’ll need to calculate the market opportunity.

2. Calculating your market opportunity

You can complete the activity "Increasing Revenue over Time" below as you calculate your market opportunity.

The next step is to calculate your market opportunity, or the number of people who you can reasonably expect will download your app.  You may need to do some competitor research online or with user surveys to figure this out. Let's see how our friends at HSBC calculate year to year revenue with our college app:

It may be tempting to overestimate your revenue, but remember that this is not a good way to get people to believe in your app.  Reasonable, well explained, and well researched numbers will help you make a great case for why your app will succeed.

Activity: Choose a Revenue Model

With your team, decide on your which revenue model you want to use to earn money. Carefully consider your users and why they are most likely to pay or not pay for. Ask some of your users through a survey if they would pay for things, and for how much. Don’t be afraid to use a combination of the different revenue models.

Activity: Increasing Revenue over Time

Now that you’ve selected a way to make money from your app, you need to think about how you can get more and more users to use it each year. You want your app to grow and become more popular, so that people will invest in your idea. Here are some guiding questions to help you think about how to get more users to download your app each year.

  1. Are you are using more money for advertising? 
  2. Are others sharing the app by word of mouth?
  3. Will you build new features that draw more users in?
  4. Are you going to hire more people to become ambassadors for your app?

You should use your revenue model and the explanation in your pitch video and in your business plan, so make sure to write this down somewhere.

Activity: Calculate your Revenue for 5 Years

Now it’s time for some calculations. You already know how your app will make money, and how you will draw in new users each year. It’s time to fill out the revenue part of this worksheet. You will need to calculate how much money you will make each year. If you aren’t sure how to do these calculations, follow the example above. You might need to do some research, or survey some of your users to make the best estimate possible. Remember that you can always add additional other sources of revenue as the years go.

Don’t worry about the operating costs and startup capital sections of this worksheet. You will do these sections in the next entrepreneurship lesson.

Reflection

It may be tempting to say your app will make tons of money but it’s very important to have a well thought-out explanation to go along with your revenue model. This will be an essential part of your pitch and how you get people to believe in your idea. If you are serious about creating a sustainable app and business, you must research and plan how you’ll get  people to download or continue engaging with your app each year.

Keep track of  your revenue model and the explanation in your pitch video and in your business plan, so make sure to write it down somewhere.

Additional Resources: Revenue Models for Nonprofits

If you are a nonprofit, you might not be planning on selling anything. However, you will still need money to develop and upkeep your app. You can still raise money by applying for things like grants or receiving donations. A grant is money that someone gives you that does not need to be repaid. Organizations or governments sometimes give grants to support projects for social good. A donation is similar to a grant but usually given by an individual. 

To apply for a grant, you have to tell the person giving the money what you plan to do with the money and how you will use it. If you do not do what you said, they might take the money back. These grants are often very competitive, so you’ll have to appeal to the funder and make the best case for why they should give the money to you above others. If you are planning on raising your revenue through grants and donations, you will need to tell your funders (who give you the money) what you will do with the money. For example, you will donate a certain number of downloads to students who would benefit from it but can’t pay for the app, or you will use the money to improve the app and sell it at half price. 

Even if your business is a nonprofit, you can still sell things or earn money through ads or other features. The difference with nonprofits is that you can’t keep the profit like you would with a social enterprise or a for-profit company. What you do with the revenue will be covered in more detail in the next entrepreneurship lesson. 

 

Entrepreneurship 6: Marketing your app

Marketing Your App

Entrepreneurship 6

Developing a marketing plan is one way to help you earn points in the "Marketing Plan" line in the Entrepreneurship section of the judging rubric.

In this lesson, you will...

  • Learn what marketing is
  • Use this worksheet to make a plan for more people to use your app through marketing
  • [Senior Division] Develop the marketing plan section of your Business Plan
  • [Senior Division] Try out some of your marketing ideas and revise your marketing plan

Note: The marketing strategy that you’ll develop in this lesson will be necessary for the Senior division to complete their 5-page business plan. However, Junior division teams should still complete this lesson and talk about their marketing strategy in their pitch video.

Key Terms

  • Marketing - The process of telling people about your business and getting them to use it.
  • 4 P's of Marketing
    • Product - The thing you are selling or offering
    • Promotion - The way you tell customers about your product
    • Price - How much the customer will pay for a product
    • Place - Where you are selling your product
  • Strategy - How you will market your app so that you can meet your goals
  • Assessment - Whether or not your strategy is working

Marketing

You could create an awesome app that solves a really important problem, but your business will not be successful if no one knows about your app. You need to get people to use your app. This is called marketing. Marketing is the process of telling people about your app and getting them to use it.

There are a lot of different reasons why someone may or may not want to download your app. In this lesson, you will create a plan so that more people will download your app. This is called a marketing strategy.

Since marketing is about getting your users to use your app, you should refresh on who your users are. Check out your project canvas or your work from Ideation Lesson 2

Marketing Strategy

The 4Ps is one way to approach marketing. You’ll want to make sure you think about the product you are selling, the price you are selling it at, the ways you are promoting it, and finally the places you are selling it in.

      Click on a part of the wheel to jump to that section!

Product

Your product is the thing that you are selling. The first step in getting people to use your product is to make sure that it is a good product that will be useful to them. You’ve already done this! In this case, your product is your app.


 

Price

The price is how much your consumer will pay for your product. You need to think about the price of your app when you are considering how to make money. However, you also need to consider how much your users are willing to pay for your app. If your price is too high, people won’t want to buy your app.

The price of your app isn’t all paid in physical money. If the app is free, but there are a lot of ads, this can be annoying to the user and they might not want to use your app. Also, if your app is free, but some of the features require an in-app purchase, such as paying to unlock new levels in a game, this might also stop some people from using your app.

If you aren’t sure how much to charge for your app, ask some of your target audience what they would be willing to pay. This can help you set a price. Here are some example questions to ask:

  • How much would you be willing to pay for this app?
  • Do ads bother you? Would you pay more for it to be ad-free?
  • Would you rather it be free, but have ads?
  • Would you be willing to pay for in-app purchases?

 

Promotion

Promotions are the ways that you will tell people about your app. Here are some examples of different types of promotions you can do to tell people about your app. Click on each tab to learn more! You don’t need to do all of them or any of them, but they could be helpful. In the activity below, we will give you some steps to take so that you can start using one of these strategies.

Media advertising

It can be pretty expensive to get media advertising. You don’t necessarily need to do any media advertising, but it might be the best way to reach some of your users. Here are some examples of media advertising.

  • Commercials on radio or television
  • Print ads in newspaper, magazines, flyers
  • Online ads on websites

Steps to get started

Commercials on radio or television

  1. This can be a really expensive option. However, there might be ways to get some airtime for cheaper. Think about some local options, does your school or does a nearby university have a radio station? If so, would they let you promote your app? What about a local television station?
  2. If you get some airtime, think about what you want to say. You can give a pitch, which you will learn about later. If your timeslot is really short, you could say a slogan. If your timeslot is really long, you could have someone interview your team or try out your app.

Print ads in newspaper, magazines

  1. Again think about some local options. Does your town have a newspaper? What about your school? These would be good places to promote your app.
  2. If you get some space in a magazine or a newspaper you’ll want to create something eye-grabbing. Use your brand colors and logo in your design. Make sure that your ad explains what your app is for and why someone should download it.

Online ads on websites

  1. What are some websites that your users might visit? These would be good places to put an ad for your app.
  2. Again, think of some local options to keep the cost down. Would your school website let you put an ad on it? What about your town?

Social Media
Word of Mouth

 

Place

The place is where your users can access your product. Since you’re creating a mobile app, you are generally restricted to the Google Play or Apple Store. However, you can make your app look great in the virtual stores by writing a strong description, using keywords your customer will relate to, and taking helpful screenshots. You should also ask your friends to download your app and leave a nice review. You may want to refer back to your market research to find the keywords you’ll want to use to attract your target audience and reference your brand to write your description in the way you want your app to be portrayed.

Make sure to include links to your app in your social media pages and in any advertisements you create! Another way to add to your distribution is to develop an online website to support your app.

Are you ready to try out some of these marketing strategies? In the next two activities, you will set some goals for your marketing strategy and then you’ll get started marketing your app. If you are in the senior division, you will use this work for your business plan. If you are in the junior division you should talk about your marketing strategy in your pitch video.

Activity: Set Marketing Goals

Before you try out some marketing strategies, it helps to have goals that you want to accomplish. Your goals should be measurable so that you can see if your marketing strategy is working. 

Here are a few examples of goals:

  • Get at least 100 app downloads per month
  • Get at least 10 likes per social post
  • Get at least 100 followers on each social media account
  • Reach $100 in sales per month

Work as a team to brainstorm goals you want to achieve.

Once you’ve brainstormed a few goals, work together to narrow it down to 2-3 goals in total. You should make sure your goals are realistic, so you are able to achieve them without making them so high that you’ll be discouraged if you are unable to reach them.

Activity: Create a Marketing Strategy

Now that you have your goals, here are some ways to get started on them. With your team, decide which method you want to use and take some of these steps to get started.

Tips for selecting a marketing strategy:

  • Think about your target audience when deciding what types of promotions that you want to use. Do your users have Twitter or Instagram? Will they see posters that you print out and hang around your school?
  • Don’t forget that some types of promotions are free - like using social media, but some cost money - like getting a commercial on TV. In the next two entrepreneurship lessons, you’ll create a budget. You’ll need to include how much your marketing efforts will costs.
  • Check out some of your competitor’s websites and social media profiles. What types of things are they posting? How are they promoting their product?

Once you have decided on a marketing strategy, follow the steps to get started listed in the content above.

Activity: Document your Marketing Plan

[Senior Division only]

If you are in the Senior Division, you can share this work in your 5-page business plan. These items can be used in the marketing plan section. 

Judges will look for this information:

Marketing Plan (strategy & implementation): 1 page

    • Branding is clear and amplifies your app’s purpose
    • An in-depth strategy for how your product will reach target users
    • Feedback from target users integrated into marketing plan
    • Details about pricing, promotions, and distribution of the app
    • An explanation of how the company will function, from when the app is produced to when the app is delivered to the customer
  • (Optional) Team’s response to feedback from initial marketing attempts (This could go into pitch video instead)

After you have written this portion of your business plan, make sure to have someone outside of your team take a look, like a mentor or a teacher. Investors place a lot of importance on marketing since even great products can fail due to poor marketing.

If you are in the junior division, you can still include this information in your pitch video and other submission materials.

Activity: Trying out your Marketing Strategy with your Target Audience

[Senior Division only]

Reflect as a team what is working and why it might be working, and adjust your plan.

Before you start this activity, please get your mentor’s or parent’s approval of the people you choose to talk to. Talk to as many people who are a part of your target audience as you can to gather feedback about your marketing strategy. You can do this at your school or in your community.

Prepare:

  • Complete a first draft of your marketing plan
  • Pick one of the advertising strategies above and complete it in your community
  • As a team, plan 5-10 questions you’d like to as members of your target audience to gather feedback about your advertising and marketing plan. Here are some ideas:

    • What did you notice about our advertising? Did it make you interested in trying out our product?
    • What could be better about our branding?
    • If you wanted to reach other people like yourself with this product, what would you do to let them know about it?
    • At this price, would you use our app? Would you buy into any of these additional features?
    • Do you understand how our app functions? What is still confusing for you?

Complete the activity by talking to target users, be sure to keep track of their responses on paper or (with their permission) on a recording device so you can reflect on what they said.

Debrief:

  • Add in their feedback to your Business Plan
  • Consider what parts of your Marketing Plan section you’d like to change. It’s okay to rewrite parts of your business plan based on the feedback from your target audience

Reflection

Congratulations, you are done with your marketing plan! Let’s review what you did:

  • Set your marketing goals
  • Created strategies to achieve your goals
  • Found a way to track and assess your progress

Remember, your marketing plan can change as many other factors change, like your product (or its features), the way consumers view your brand or even budgets. It’s up to you to be flexible and modify your plans as best you can.

Entrepreneurship 1: Types of Businesses and Mission Statements

Types of Businesses and Mission Statements

Entrepreneurship 1

This lesson will help you earn points in the following judging rubric lines in the Entrepreneurship section: "Marketing Plan" and "Business Plan". It could also help with the "Future Goals" line in the Overall Impression section.

In this lesson, you will...

  • Learn about different types of businesses
  • Choose which type of business yours will be
  • Write a mission statement for your business

Key Terms

  • Business - any organization or person that is doing something in exchange for money or another good
  • Profit - money made from operating a business
  • Nonprofit - a company that has a goal other than making money
  • Social Enterprise - a business that focuses on doing something beyond making a profit, like helping solve a social issue
  • For-Profit - a company that has the goal to make money
  • Mission Statement - a formal summary of the values of a company, organization, or individual

What is a Business?

What comes to mind when you hear the word ‘business’? You might think of a local farm stand, a grocery store, a bank, or a big technology company like Facebook or WhatsApp. A business is any organization or person that is doing something in exchange for money or another good. Businesses can make, buy, or sell goods (like a company that makes cars), or they can provide services (such as a mobile phone service company).

To run a business, you don’t need a storefront, a lot of employees, or even a physical product to sell. You don’t have to be an adults up to start your own business! There are plenty of young people who have started their own businesses. For example, Maddie Bradshaw started her business at the age of 13. She couldn’t find any school locker decorations she liked, so she decided to make and sell her own. She realized that the best person to understand what young people like and want to buy is another young person!

Different Types of Businesses

Usually we think of a business as a way to make money,  but businesses can have other goals besides making money. These can be social goals, such as helping feed hungry people, or providing students with a better education. They can also be business goals such as creating eco-friendly products or providing customers with the best product possible. All business have one thing in common; they need to have some way to bring in money so that they can continue to operate. In this section, you will learn about three types of businesses: for-profits, non-profits, and social enterprises.

For-profit

Make Money

For profit businesses focus on earning a profit by selling goods or services. They can also have goals, such as creating the best products possible or having great customer service.


Examples:

  • Apple - Apple is a major seller of phones, computers, software and more. Their goal is to design the best computers and phones in the world.
  • McDonalds - Mcdonald’s is one of the world’s largest food corporations. Their goal is to be their customers' favorite place and way to eat and drink.

Social Enterprise 

Make Money & Do Good  

Social enterprises focus on doing something beyond making a profit, like helping solve a social issue. They use some of the profit they make to accomplish this goal.


Examples:

  • TOMS -  TOMS is a clothing company. For every one pair of shoes that a customer buys, they donate a pair to someone in need. Their goal is to help people in need.
  • Every Table - A healthy restaurant that has multiple locations. Some are in richer neighborhoods and some are in poor neighborhoods. The food in richer neighborhoods is sold at a higher price, and the money made from these sales is used to sell food for much cheaper in the poorer neighborhoods. Their goal is to provide healthy food to people who live in neighborhoods without a lot of healthy options.

Nonprofit

Do Good

Nonprofits exist to help solve a problem or contribute to a cause. They do not have the goal of making money.

 


Examples:

  • UNICEF -UNICEF provides resources communities who in urgent need, such as after a major natural disaster or a war.
  • Technovation Girls - Technovation Girls helps girls around the world develop the skills to become technology and entrepreneurship leaders. Technovation Girls is able to keep operating through individual donations and grants given by the government and large corporations.

Here is each type of business explained by a food cart.

For-profit Food Cart

You start your food cart with the main goal of making money by selling delicious food to people. You spend the money you earn on yourself and on improving your business and food quality.

Social Enterprise Food Cart

You start a food cart with the main goal of raising awareness of hunger in your community. For every three meals you sell, you give one meal to a person in need. You spend some of the money you earn on improving your business and food quality, some of it on yourself, and some of it on providing meals for the hungry.

Nonprofit Food Cart

You start a food cart with the main goal to provide healthy food to people who can’t afford it.  You decide to have a class every night that teaches families how to cook healthy food. You provide the ingredients and let them take all the food they make home to eat for dinner. You get a donation from a local bank to run your program. With this donation, you run your food cart to provide food to those in need.

Social enterprise is a relatively new category for companies, so don’t worry if you’re a little confused. For simplicity, think of social enterprise as being in between for-profit and non-profit business. It is up to the business to decide how far they want to lean to either side.

Watch this video to learn more about social enterprises:

Mission Statement

As you develop your business during Technovation Girls, you might realize that your company falls somewhere between for-profit and nonprofit. That is completely okay. Your company will have the goal of solving the problem that you identify, but you will also want to generate revenue (money) so that you can keep the business running or scale it up (grow its size and impact). One thing that will help you stay true to the original goal of your business is to always stay close to your company’s mission statement.

A mission statement is a formal summary of the values of a company, organization, or individual. Mission statements help companies determine what is important and what is not, and clearly state who will be served and how. A mission statement is usually a short and simple sentence that outlines what the organization’s purpose is and how it accomplishes that.

In this lesson, you will create a mission statement for your business with your team and share it with your mentor. Your mission statement can change as your company grows but remember that this is the “heart” of your business. Try to stay true to this statement.

Tip: If you are stuck, look at some other organizations tackling hard challenges. Look at their mission statements and see what you can learn:

For-Profit Example:

Nike: ”To bring inspiration and innovation to every athlete* in the world.” The legendary University of Oregon track and field coach, and Nike co-founder, Bill Bowerman said, “If you have a body, you are an athlete.”

Social Enterprise Example:

Kiva: “Kiva’s mission is to connect people through lending to alleviate poverty. We celebrate and support people looking to create a better future for themselves, their families and their communities.”

Nonprofit Example:

Amnesty International: “Our vision is of a world in which every person – regardless of race, religion, ethnicity, sexual orientation or gender identity – enjoys all of the human rights enshrined in the Universal Declaration of Human Rights (UDHR) and other internationally recognized human rights standards.”

Activity: Decide on a Type of Business

Now that you are more familiar with different types of businesses, it is time to start thinking about the business you want to build with your team.With your team, choose one type of business that you would like to be, for-profit, social enterprise or nonprofit.

To help you decide, discuss the following questions with your team.

  • What type of business do you want yours to be? (for-profit, nonprofit, or social enterprise)
  • What do you want to accomplish by opening your business?
  • What are some of the goals of your business?
  • How do you think you can sustain (keep it running) your business?

You don’t need to have the answers to all these questions today but it is important to keep thinking of these as you build your business plan. You can always change the type of business as you further develop your app and business plan!

Activity: Create your Mission Statement

With your team, you will develop a mission statement. A mission statement should be 2-3 sentences long and should describe the goals of your company. Here are some questions that will help guide your mission statement:

  • What do we do?
  • How do we do it?
  • Whom do we do it for?
  • What value are we bringing?

Reflection

  • Why do you think there are different types of businesses?
  • What do you think advantages of different types of business are?
  • What type of business do you think will be best in solving the community problem you are trying to tackle?

Additional Resources 

 

Non-profit Logistics

There are not always clear lines between for-profits and nonprofits, but there might be different tax responsibilities depending on how the business is structured and restrictions on how it can spend the money earned. In most countries, all businesses need to pay a tax to the government. The amount of tax they have to pay is greatly impacted by what type of business it is.

For example, in the United States, if you are a nonprofit, you do not have to pay as many taxes, and those who donate to you can get a tax break as well. However, it is not enough to just say you are a nonprofit or a social enterprise. You will need to follow rules and prove that you are following them. Each country’s law and rules are different. It is out of the scope of this competition to check and follow these rules but they are something that you should keep in mind when starting a business outside of Technovation Girls!