The Beauty of a Sales Force

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The Beauty of a Sales Force
Direct Customer Feedback

• If they dont buy, why not?
• Competitor has a better feature
• Just signed a contract with someone else
• Competitor is customers brother
• Dont like the color

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The Downside of a Sales Force
Slow and Expensive

• Find the right people, skills
• Provide training, marketing materials
• Offer good salaries, sales bonuses
• Pay for cars, cell phones, travel

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Probably Necessary

• If your customer
• Needs a lot of educating
• Requires a lot of customization
• Is paying a lot or
• Taking a big risk

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PR

• Free exposure in
• Newspaper reviews
• TV stories
• Alumni publications
• Celebrity photos

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Develop Partnerships
Keep in Mind

• New homeowners Real estate agents
• For kids programs -- Schools
• People with certain conditions Doctors
• Churches, libraries, nonprofits

They will only partner with you if there is
something in it for them!
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Find Out
An exclusive deal?

• Will they partner with you?
• Do they want something in return?

A share of your Sales?
To do good?
Another service for their members?
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Pricing Options

• Bundled pricing
• Volume discounts
• Incentives for referring new customers
• Low introductory rate

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Some Advice

• Plan to try a few methods
• in a small way
• Measure results
• Be realistic about costs

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• Marketing Strategy
• Hire Sales Force
• Visit customers, explain the benefits
• List in organic seafood directories
• Advertise with trade associations
• Host events, tours, tastings

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How will you Start and Expand?

• Start small then grow big
• Start with one product, then add?
• Sell in one store, then more?
• Start in New Haven
• then go to Hartford?

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Growth Strategy

• Start small
• Prove you can do it -- then expand

CT
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Your Team

• Who are the Yale members?
• What roles will they play?
• What skills, experience do they have?

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Management Strategy

• Key management people skills?
• Who are you missing but will hire?
• Strategy for hiring and retaining people?
• Advisory board or board of directors?

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Sabin Workshop

• Financial Projections

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Purpose of Financial Projections

• Have you considered the details?
• Do you know how much you need?
• gt to start?
• gt to grow?
• Do you have a plan for the prize ?
• Can the business make money?

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Financial Projections

• Income Statement
• Balance Sheet
• Sources and Uses of Funds

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What Time Periods ?

• Year 1 -- Monthly
• Years 1 through 3 -- Annual

Three years
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Milestones
Focus for the Prize

• In the life of a business
• 1. Achieve some sales
• 2. Reach cash flow break-even
• 3. Exit -- for investors

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?
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Doing Projections -- Requires

• Clear idea of the purpose / users
• Knowledge of accounting / spreadsheets
• Understanding of key drivers
• Attention to detail and vision
• A lot of time

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Warning about Projections

• You are likely to be much too optimistic
• gt Things just take longer -- to happen
• gt Under-estimate cash needed

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Start with an Income Statement
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Income Statement Definitions

• Revenues
• gt value exchanged
• gt for goods or services
• Expenses
• gt value of resources used
• gt to earn those revenues

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Expenses Examples

• Divide expenses into
• Direct Costs/Expenses
• and
• Indirect Costs/Expenses

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Direct Costs
Costs of Making a Product/Service

• Direct Costs or Cost of Good Sold

• Materials
• Packaging
• Shipping

Direct Labor Customer Service Depreciation
Revenues Cost of Goods Sold Gross Profit
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Indirect Costs
Other Costs to run the Company or Project

• Operating Expenses

Sales Expense CEO RD

• Rent
• Accounting
• Insurance

Gross Profit Operating Costs Operating Income
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Net Income (Loss)

• Operating Income minus
• Interest expense
• Taxes
• One time events

You wont have any of these
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Returning to Depreciation

• Fixed Assets
• Long term assets of the company
• Not for sale
• Things that have or create value over time

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Examples of Fixed Assets
Buildings Factories Vehicles
Equipment Computers Furniture
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Returning to Depreciation

• Fixed Assets provides value over time
• Also, wears out over time
• Depreciation spreads these costs
• Over their useful life

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Why am I telling you this?
Depreciation 4
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Back to Building Projections
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First 12 Months Projections

• Most detailed, careful
• Detail shows your thinking
• Some accuracy is possible

List all key assumptions
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Think Big Picture

• What are the key sales drivers ?

• gt People ?
• gt Machines ?
• gt Advertising?
• gt New locations?

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Example

• Sales require a direct sales force

• gt How many sales calls per month?
• gt Success rate of sales calls?
• gt Time till sale is completed?
• gt Average price of a sale?

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Think Big Picture

• The Good Fish key sales driver

• gt Systems that grow fish

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• Sales depend on Pod Systems
• A Pod System produces 50,000 lbs fish/yr
• Fresh organic tilapia sells for 5.63/lb
• One Pod System in Year 1
• Couple of months to get going
• Couple of months to ramp up

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First 12 Months Projections
Do this for 12 months
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First Year
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Next Step -- Costs

• Going forward, 12 months

• Cost of Goods Sold materials, labor, delivery
• Operating costs sales people, travel, ads,
  CEO, rent, supplies

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• Cost of Goods Sold
• Baby fish
• Facilities Rent heating
• Feed Organic vegetarian
• Staff Monitor, move, clean, fillet, package fish
• Delivery to customers
• Byproducts Waste and offal

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• Operating (Indirect) Costs
• Sales Force
• List in organic seafood directories
• Advertise with trade associations
• Host events, tours, tastings
• CEO, accounting, IT, office rent

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• Depreciation from Equipment purchases
• Pod System
• Filleting machine
• 60,000 total
• Last 10 years
• (120 months)

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Cost Projections
Do this for 12 months
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Add up the First Year
Are the projections reasonable?
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Moving Forward

• First year projections aim for accuracy
• After that, its more vision
• Focus on turning a profit

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Sales Breakeven Year

• Layer in more of your revenue driver
• Buy more machines
• Add more sales people
• Open more locations

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Break Even
How big must sales be?
Break Even Year

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Break Even
15 pods
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And, Fill in the Gaps
Fill in
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Fill in the Gaps
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Sanity Check

• Are profit margins too high?

• Are cost ratios high enough?

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Comparable Companies

• Public companies in the same industry
• Or similar industry
• Projected earnings -- going up
• Do not use those with earnings going down

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For Your Executive Summary
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Next Building a Balance Sheet
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Transfer Income Statement Data

• From Custom Projections
• Into Model Template

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Construct Model Formulas
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Balance Sheet -- It Matters !

• Make sure it actually does balance !
• Make sure it grows with sales
• Growth requires more money!

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Example -- Balance Sheet
From Balance Sheet Formulas
Loss
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Sell Some Stock
Done !
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Example -- Next Year
From Balance Sheet Formulas
Loss
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Sell More Stock
Done !
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Finish Your Model

• Add -- Sources Uses of Funds
• Look at the numbers. Do they make sense ?
• Make a list of assumptions

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Final Words of Advice

• Do your homework
• Use data, research talk to customers
• Not just your opinions
• Start small, then grow bigger
• Be credible dont over-promise
• Remember Good writing matters!

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Sources for Research

• Bloomberg
• One Source
• Yahoo! Finance

• SEC -- Edgar
• Hoovers
• Annual Reports

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Better Sources for Research

• Lexis / Nexis
• Factiva
• Industry Publications
• Mintel (consumer research reports)
• www.som.yale.edu/ssl

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Best Sources for Research

• Industry Associations
• Competitors Websites
• Talking to experts!

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Questions?