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Part I
Business Model Mechanics
Become familiar with the basic mechanics of business models. Assess your business opportunity to make sure that it is worth pursuing.
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Chapter 1
What Do You Bring to the Table?
âYou are magic and that's what makes it worth looking at ⌠You are poised; you are professional. To have taken it as far as you have is very impressive. I'll make you an offer.â
âDragon to Pitcher
Assessment #1: Self-Assessment
Take an inventory of the financial, emotional, and physical sacrifices that you are willing to make to bring your business concept to the market. Launch your business concept with your eyes wide open, so that you are not shocked when the highest highs and lowest lows start to creep into your entrepreneurial psyche during the launch phase.
We have all seen the proverbial fish out of water, flapping back and forth. Pulled from the water where it happily thrives, it suffocates in its new environment. Many new entrepreneurs suffer the same initial shock when they leave a salaried or hourly position to enter the entrepreneurial world. The things you used to take for granted are no longer there: your computer breaks down, and you realize that you no longer have tech support to call; your printer mysteriously stops working, and the cash that you are lacking to fix it means you have to go into your meeting empty-handed; you're out of paper 30 minutes before you have to make that big proposal, and now you have to email it instead. The good news is that diverse backgrounds are precisely the reason so many entrepreneurs with sound business models succeed. Former corporate-world professionals understand immediately how to maintain a disciplined daily work schedule. Stay-at-home moms know how to multi-task and wear multiple hats. Hourly workers know how to get a job done within a limited amount of time and won't complain about working overtime.
If you want to eliminate having any fear whatsoever, embrace your past experiencesâdon't run from them. Know your limits, but don't be held back by them. Use every skill you have learned in the past to make your business happen. For example, pitcher Karlo Krauzig is trying to compete with the Absoluts, the Stolichnayas, and the Smirnoffs of the world. Do you know anyone who is launching a vodka brand? No, not likely. You need about $700,000 to $1 million to get up and running in the vodka business according to Krauzig, who came on the Den to seek funding for the Yukon Shine Distillery. The odds are stacked against you, especially in the high-stakes, highly competitive world of vodka distillation and distribution. But never underestimate the perseverance of an entrepreneur, especially if he's from the rugged Yukon where hard work is common and economic development grants are widely available.
Yukon Shine Distillery
Pitcher: Karlo Krauzig, Season 7, Episode 2
Product Description
Yukon Winter Vodka is unique because Karlo uses Yukon Gold potatoes, rye, barley, and even actual Yukon gold in his filtration process, and then bottles the vodka in a unique-looking premium bottle.
Background
After he made his own fortune in real estate and the pet business, Karlo Krauzig decided to get into the vodka business. So, he spent the last five years learning everything he could about distilling and bottling vodka. He put $1 million of his own money into building a distillery to produce and bottle his âdangerously smoothâ premium product. Then he came to the Den to secure funding and distribution connections so that he could launch his brand.
Problem Statement
How to compete in the high-margin, highly competitive vodka category.
Business Model
Karlo Krauzig built and owns a distillery that is capable of producing 50,000 bottles a year and will distribute them through BC Liquor Stores at a retail price of $50.
Proof of Concept
- Funding: The Yukon offers several economic development grants that will support his launch.
- Capacity: Distillery is fully functional with the capacity to produce 50,000 bottles a year.
- Distribution: Landed a deal to distribute the vodka through BC Liquor Stores.
Dragons' Deal
- The Ask: $300,000 for 33% equity.
- Company Valuation: $909,091.
- The Deal: $300,000 for 50% equity plus the distribution connections of one key Dragon.
The Warm-Up: Self-Assessment Defined
A self-assessment measures how fit you are to take on the business concept that you are proposing. The entrepreneurial world is not a meritocracy where hard work automatically pays off. It takes the right opportunity, good management, and a lot of luck. Entrepreneurs who succeed know as much about seeing an idea through to the end as when to quit. Overcommitting to a business idea that isn't going anywhere can be detrimental to your financial and emotional well-being. One way of staying on track is to conduct a self-assessment. The purpose of a self-assessment is to make sure you know exactly what you are getting yourself into personally when you decide to launch a new business concept.
Step 1: Personal MotivationâWhat inspired you to launch your business concept, and what will keep you inspired?
Inspiration
Many businesses are inspired by needs that entrepreneurs have in their business or personal worlds. When entrepreneurs fill those voids for themselves, they decide that others may want the same solutions. They then go out and build prototype products or services and begin the processes of launching their business concepts. When the obstacles and challenges of entrepreneurship unfold from there, it is important to stay connected to what originally inspired the launch of the business. But it is equally important to know what to do if your business isn't showing signs of earning back your investment and providing positive cash flow.
Role Modelling
One way to stay on track from day one is to use another successful business as a big-picture role model for what it is you're trying to do. That's not to say that you should follow a âme tooâ strategy by replicating a competitor's strategy. However, you can look at other industries to find companies that have used an approach that might work for your business. For example:
- We want to do for financial advice what H&R Block did for tax preparation.
- I want to be the Martha Stewart of the personal chef industry.
- We want to do for soup what Mr. Sub did for sandwiches.
- We want to do for chicken what Boston Pizza did for pizza.
Outcomes
Outcomes are what you want both financially and emotionally in return for launching your business concept in the first place. It is critical that you set clear personal outcomes for your business so that pride doesn't keep you committed to a business that isn't going anywhere. For example:
