CREATING JOBS CHANGING

Next-Generation FellowshipProgram

Financial Feasibility
LIVES

Activate. Week8
https://www.wfglobal.org

WADHWANI FOUNDATION |CREATING JOBSCHANGING LIVES

Overview of
the program and
your learning
journeyover the
14weeks: Milestone4
Launch

Milestone3
Go-To-Market Week 9:Enhance
Go To Market
Sale Planning

Milestone2 Week10:Funding
Discover Funding Options: Early
Stage
Week 7:Test
Milestone1 Prototype
Market Validation
Explore
Week 4:Value Week 8:Refine
Value Proposition Financial Feasibility
Sustainable Differentiation Sustainability

Week 1:Intro Week 5: Competition

Entrepreneurial Analyzing competition
Thinking Creating Competitive
Advantage

Week 2:Opportunity Week 6: BusinessModel

Opportunity Evaluation Lean Canvas
Problem Definition

Week 3:Customer
Market Type
Finding your Niche
Customer Persona

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 CONCEPTS
• Why is it important to understand estimated costs, revenues,
andpricing?
• Howtodetermineifyourbusinesswillbeviable/profitable
• Whatisbootstrappingandhowtorunaleanbusiness

By the end of the

week, you will be
able to:
● Ascertain Costs,
● Arrive at appropriate pricing strategy
● Financial Projections, Key Financial
Metrics,

Steps:
1. Cost and Revenue
2. Profitability Checks
3. Bootstrapping and Initial Financing

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WADHWANIFOUNDATION|CREATINGJOBS CHANGING LIVES
Introduction
Profitability Bootstrapping and
Cost and Revenue Initial Financing
Check

Story time: BookMyShow

An online ticket booking platform for movies, shows, concerts and many more events. A
company that began with just ₹25,000 as initial capital investment in the year 1999,
BookMyShow is now estimated to be worth $1 billion.

Startup costs: understanding the costs for your business 2022 | Start your business
QuickBooks, YouTube

How Much Does It Cost To Start A Startup

Forbes

Does Your Startup Have a Spending Strategy?

Harvard Business Review

Guides from the website portal GoDaddy,

in their video, expand upon the costs of
setting up a new start-up.
The video has been split into different
chapters, each exploring an aspect of
start-up costs

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Cost and Revenue
Cost and Profitability Bootstrapping and
Revenue Check Initial Financing

Let’s shift our focus to Cost Structure and Revenue Streams, and we’ll do this by
understanding the concepts of cost, revenue and pricing.
Now that you have a fixed MVP of your venture, it is vital to remember this:
• Know all your costs before you even begin your business – these will generally be
based on your expected revenues. This will help you understand the likelihood of
your business becoming profitable

The kinds of Costs that you will come across:

• Startup Costs – these costs (also called capital costs) are those that you would incur
before you start your business
• Fixed Costs – fixed costs are those that your business will sustain regularly regardless
of your production and sales. This is usually calculated for the duration of a month at
a time.
• Variable Costs – Unlike fixed costs, variable costs will depend on your rates of
production and sales.
It is also essential that you identify whether your venture is cost-driven or value-driven. If
your venture is a low value price proposition, then your venture is cost driven. If your
venture is value driven, it will focus on value proposition and premium product.

Keeping these in mind, you can see why it is important that you have a realistic
understanding of your cost estimates. And it will also make it easier to fill in the cost
structure space of your table.

Remember!!!!
It is always better to have variable costs rather
than to have fixed costs, and better to have fixed
than start-up costs.

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Cost and Revenue
Cost and Profitability Bootstrapping and
Revenue Check Initial Financing

Pricing
Before we can work towards revenue streams, we must understand the idea of Pricing. Pricing your
venture is central to profit making. The key to finding the right pricing is to make sure your
product pricing retains customers while still making you a profit.
Another formula to remember under pricing is:
PROFIT = REVENUE – (FIXED + VARIABLE) COSTS
Fixing your price will depend on your customer segment, which you have already
covered in depth before. Depending on your customer segment, you can select a
particular pricing strategy to suit both the customer and your venture.
Pricing strategy is largely divided into three types:
• Maximization
• Market Penetration
• Market Skimming

12 Techniques For Selecting The Right Pricing Strategy

Forbes

Three Steps To Choose Your Pricing Strategy

Forbes

WADHWANIFOUNDATION|CREATINGJOBS CHANGING LIVES 6

Cost and Revenue
Cost and Profitability Bootstrapping and
Revenue Check Initial Financing

So let’s talk money!

Where cost is what we spend to land our venture and keep it going, revenue is the income we get
through our sales. Usually, there will just be income from your product alone. But it is always smart to
look for ways through which you can increase your revenue sources.

Let’s understand this better

If I open a bakery that specializes in eggless cakes and desserts, my biggest income
will come simply from my niche product. However, I could begin a delivery service, or
partner up with a larger delivery service group. This will become another srouce of
income, outside of just my product alone.

Every source of income you have, through your venture, is called a revenue stream. So your biggest
strategy should be to understand how you can reach out to the same customer or customer segment
for revenue through multiple different ways. Since it is from the same customer, the revenue stream
becomes more dependable, and you have to clearly define all your revenue streams.
These are the three things that you must state about your revenue streams:
• The source of the revenue
• The Pricing
• Their lifecycle
These factors will help you decide whether that particular stream is profitable or not. With the bakery
example from above, if the delivery system costs more than it brings in, it is not a profitable revenue
stream for the bakery venture. The larger implications of this is that you have to maintain a certain
level of flexibility in terms of your revenue model. The best way to explore your revenue model is to
explore the questions of what value your customers are willing to pay for your product, and how
much each revenue stream contributes to your overall income and revenue.

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Profitability Check
Cost and Profitability Bootstrapping and
Revenue Check Initial Financing

After having identified and understood costs and revenues and placed them within
the contexts of your own ventures, the next step would be to understand the
profitability of your venture, and your revenue and cost models.
This is usually done through a basic financial plan, which will help you understand if
your product and venture are profitable.

From Startup To Profitable Venture: Four Common Entrepreneurship Questions

Forbes

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Bootstrapping and
Initial Financing Cost and
Revenue
Profitability
Check
Bootstrapping
and Initial
Financing

What exactly is Bootstrapping?

This is a method of starting your venture or business with your own resources. This
means that the entire venture will be funded without any external investment.
Raising capital can easily done, through the most inexpensive ways, through
bootstrapping. These capital sources generally include loans from family or friends,
your own personal savings or finances, trade credit and profits and revenue from
your venture.
• Personal finances generally requires some insight and introspection into your
savings, your investments in terms of real estate and assets.
• Loans from friends and family also brings with it some requirements. You must
make sure you request loan of a specific amount with timelines and milestones
in mind. A formal contract and a payback deadline clarifies to both parties the
goals to be achieved.
• Business and Trade credit involves extended credit from a supplier, especially if
you are a repeat or regular customer. Most suppliers are open to smart
negotiations for extensions on payment and credit. This, of course, works only
once you have established the credibility of the venture.
• Profits and revenue generally means that the venture will essentially depend on
the payment from the customer as a method to finance and fund the growth of
the venture itself.

Leveraging of resources becomes central to the bootstrapping method, and thus

maximizes the expanse of the venture while minimizing external expenditure. Once
you have done this, you then have to consider how you can optimally utilize your
funds optimally.

The Pros And Cons Of Bootstrapping Startups

Forbes

Top 10 Indian Startups That Bootstrapped Their Way to

Success

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Call to Action!
You have now made it through the concepts of costs, revenue and
bootstrapping. Through this, you have come to understand the role
funding and finance has to play in your venture’s set up and growth. Now,
what you have to do is sit down with your venture, and work through your
handouts to understand the practical application of your venture’s
financing.

It is now time to walk yourself through the steps of financial feasibility:

Steps to Understand the Financial Feasibility of your Venture:
Step 1: Estimate the Costs of your Venture
➢ Startup Costs
➢ Fixed Costs
➢ Variable Costs

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Call to Action!
Steps to Understand the Financial Feasibility of your Venture:
Step 2: Estimate your Revenue
➢ Identify your Price Point
➢ Estimate the number of units sold in a fixed time period (monthly, quarterly)

Step 3: Identify Additional Revenue Streams

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Call to Action!
Steps to Understand the Financial Feasibility of your Venture:
Step 4: Analyze your Key Metrics
➢ Gross Profit/ Contribution
➢ Net profit
➢ Breakeven
➢ Payback Period

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 Call to Action!
Step 5: Identify the Sources and Uses of your Funds

You can always use the same model in the future

and apply it on any venture youare working on to
ensure proper analysis of the financial feasibility
of the venture
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FINAL COVER

nextgen.global@wfglobal.org

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ADHWANIANIF
FOUN
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TION||CREA
CREATING
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