MHR EXAM 2
Identify LTV based on the following information for a co-working space: Price / month: $500 Cost / month to the co-working management company: $100 Average tenant use: 25 months
$10,000
Calculate Cost of Customer Acquisition (CoCA) based on the following information for a co-working space: Total sales & marketing budget: $1,000 Sales & marketing associated with bringing in new customers: $500 Number of new customers acquired: 5
$100
Calculate cost of customer acquisition based on the following information for a co-working space. Total sales and marketing budget: $1,000; sales and marketing associated with bringing in new customers: $500; number of new customers acquired: 5
$100
You have invented a new treatment for sick cows that will save farmers $1000/treatment. The cost of producing each treatment is $20. Assume you are following a 'value-based pricing' strategy. Which of the following is your best pricing option for maximizing your profits?
$300
Use the following information: A new startup called DanO.com has launched a website where you can subscribe on a monthly basis to receive inspirational quotes and cartoons on the topic of entrepreneurship via email. The business has the following attributes: Monthly subscription sells for $15/customer/month Cost of sending out the email is $5/customer/month The average customer subscribes for 10 months and then drops the service Placing 1,000 Google ads will cost $200. 5% who see the ad go to the website to request more info. Customers that request more information receive a personal sales call that costs $20/call. 60% of those who receive a call become a customer. What is The Cost of Customer Acquisition at DanO.com?
$40
Use the following information: a new startup called DanO.com has launched a website where you can subscribe on a monthly basis to receive inspirational quotes and cartoons on the topic of entrepreneurship via email. The business has the following attributes: monthly subscription sells for $15/customer/month, cost of sending out the emails is $5/customer/month - expected customer life is 10 months, placing 1,000 google ads will cost $200, 5% who see the ad go to the website to request more info, customers that require more information receive a personal sales call that costs $20/call, 60% of those who receive a call become a customer. What is the lifetime value of a customer at DanO.com
$40
The basic equation for calculating LTV (lifetime value) of a customer is:
(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)
The basic equation for calculating LTV (lifetime value) of a customer is
(average value of a sale) x (number of repeat transactions) x (average retention time in months or years for a typical customer)
You run a t-shirt printing store. You estimate the cost of a single blank shirt + ink to be $12, and your selling price will be $18. The cost in time and materials to set up the printer for a new design is $60. What is your break-even quantity on a specific design?
10 shirts
Companies engage in prototyping and experimentation in order to:
Access the viability of new products and service quickly
All of the following are considered additional or secondary roles in the decision-making unit EXCEPT:
Champion Secondary Roles: -People (organizations) with vet power -influencers -purchasing department
The author of disciplined entrepreneurship describes a decision making unit as being made up of
Champion, economic buyer and influencers
Think about a large insurance company such as American Family (or State Farm). Where on the business model (or lean) canvas does internet advertising belong
Channels
Think about a large insurance company, such as American Family (or State Farm, or Zurich, etc.). Where on the business model (or lean) canvas does internet advertising belong?
Channels
Which part of the business model canvas described how a company communicates with and reaches its customer segments to deliver a value proposition
Channels
The best types of experiments to run as you prepare to launch your venture are:
Cheap, quick, and easy
Which part of the Business Model Canvas describes all costs incurred to operate a business model?
Cost Structures
In "build, measure, learn" (lean startup) framework, the key lesson is
Create something to show customers and get their feedback as quickly as possible
In the "Build, Measure, Learn" (lean startup) framework, the key lesson is:
Create something to show customers and get their feedback as quickly as possible
Which part of the Business Model Canvas describes the types of relationships a company establishes with specific customer segments?
Customer Relationships
Which part of the business model canvas describes the type of relationship a company establishes with specific customer segments
Customer relationships
Assume you have completed a CoCA / LV analysis for your startup company. You have found that your cost of customer acquisition is greater than the lifetime value of a customer. Based on this finding what should you focus on?
Decreasing the cost of customer acquisition
If your MVBP (minimum viable business product) appears to be successful, then the next step is to:
Develop a Product Plan that identifies which features should be added to the next iteration of your product and targeted at the next market segment.
In Geoffrey Moore's "Crossing the Chasm" framework, the customers who are willing to pay more but also want attention and service are part of the:
Early adopters
Think about a McDonald's Happy meal. Which of the following customer types is the most accurate for a parent
Economic buyers
Mapping the process to acquire a paying customer usually requires all of the following steps EXCEPT:
Estimating the per unit cost of acquiring a new customer
Mapping the process to acquire a paying customer usually requires all of the following steps except
Estimating the per unit cost of acquiring a new customer
It is always easier to raise prices than to lower prices
Fakse
An example of a consumable business model would be a free website that sells your information to advertisers
False
Calculating total addressable market for follow-on markets is essential relatively early in the venturing process because you need to be prepared to pivot if your beachhead market does not develop as expected
False
In The Use of Knowledge in Society paper, Hayek argued that centralized planning was a superior economic system because it allowed experts with data to determine the price and production levels instead of leaving those decisions to a large number of individuals and businesses
False
Long-term sales processes are focused almost entirely on world of mouth and advertising
False
Once you have identified your beachhead market, you should identify 10-12 adjacent markets and calculate TAM for each.
False
The 17 business model presented in disciplined entrepreneurship represent the full set of possible business models you should consider for your venture
False
The 17 business models presented in Disciplined entrepreneurship represent the full set of possible business models you should consider for your venture.
False
The persona for your product is also the primary economic buyer.
False
If your business fails, what happens to the money invested by angels or venture capital firms (equity investments)?
First you pay off any loans or trade payables (suppliers). If there's anything left, it might get paid out to the stockholders.
All of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT:
Focus on one customer at a time until you close that customer WAYS TO: -Automate as much as possible -Decrease the cost of new leads (people who might be interested) -Use direct sales judiciously because it is expensive
A seed funding round likely indicates the venture:
Has no product and no revenue
Lifetime value is important because it tells you
How much total profit (value) you can expect from a particular customer which tells you how much you can spend to acquire that customer
According to the Art of Startups by Bhide, bootstrapping a venture is a good idea because:
It reveals hidden problems and forces the company to solve them.
Which part of the business model canvas describes the most important things a company must do to make its business model work
Key activities
Which party of the business model canvas describes the network of suppliers and partners that make the business model work
Key partnerships
Which part of the business model canvas describes the most important assets required to make a business model work
Key resources
In Geoffrey Moore's "Crossing the chasm" framework the customers who make conservative decisions requiring well-defined and proved information are the
Late majority
Customers may be resistant to purchasing a new or unfamiliar product. Steps that you can take to overcome this resistance include:
Make it compatible with existing customer behavior
Which business model relies on the customer providing their credit card or billing information in advance and then being charged for small purchases usually of digital goods with no physical value
Microtransactions
Which business model relies on the customer providing their credit card or billing information in advance and then being charged for small purchases, usually of digital goods with no physical value?
Microtransactions
In "build, measure, learn" Eric Ries tells the story of their instant messaging startup IMVU. They spent 6 grueling months developing the product and when they released it
No one even tried it
All of the following are primary roles in the decision-making unit EXCEPT:
Purchasing Agent Primary Roles: -Champion -End-User -Primary Economic Buyer
In the Daymond John interview, he talked about the importance of using influencers when starting FUBU. the influencers that had the most impact in the early days of his business were
Rappers
Which part of the business model canvas describes the cash a company generates from each customer segment
Revenue streams
After your beachhead market, follow-on markets include:
Selling new venture of your product to the same customers and selling your initial product to markets that are similar to your beachhead
When testing assumptions, even if "the dogs eat the dog food" you will still have to show that:
Someone will actually pay for the dog food.
All of the following are good ways to reduce COCA (cost of customer acquisition) except
Target the customer segment with the longest sales cycles so you have the most time to close deals
In "a broken place" the article about better place and entrepreneur Shai Agassi the business model began to fall apart when
The actual car produced by the company was lower-end than planned with less travel range and a higher price
In her talk on why business models matter, Ann Miura-ko of Floodgate Ventures says that the business model helps show whether:
The combination of elements leads to "dollars in" being greater than "dollars out" or not.
Lifetime value of a customer should take all of the following into account EXCEPT:
The cost of acquiring the customer TAKE INTO ACCOUNT: -recurring revenue -one time revenue -costs of serving the customer
In the Commanding Heights video the Polish egg market was an example of:
The lack of price controls caused the prices to initially climb and then decline
According to "fake it til you make it" the biggest problem with building a fully functional product/service rather than a (90%) facade is
The longer you spend working on a prototype or a real product, the more attached you'll become and the less likely you'll be to accept negative test results
In the decision-making unit an influencer is
The person with depth of experience whose opinion can affect the rest of the decision making unit
In the decision-making unit, an influencer is:
The person with depth of experience whose opinion can affect the rest of the decision-making unit
Which of the following is a key principle of the "prototype mindset?
The prototype must appear real
Cost of customer acquisition (CoCA) also known as customer acquisition cost (CAC) is best defined as
The total sales and marketing cost required to earn a new customer
A key real world lesson of the stories told about the electric car company "Better Place" in your readings is:
There are limits of innovation and it is difficult to get consumers to embrace new technology.
In the video "To Raise Money or Not Part 2," the speaker points out that one of the key factors that helped them raise venture capital was:
They got funding from an angel investor who was well connected in industry and with the VC firms.
A business model is a framework by which you capture value from customers based on the product or service you sell
True
Calculating the total addressable market size for follow-on markets helps you stay aware of the long-term potential of your business
True
Hayek argued that knowledge of time and place is more important than scientific knowledge in The Use of Knowledge in Society paper
True
It is important to carefully consider your new venture's business model because it you many options to choose from and it is difficult to change your business model later
True
It is important to carefully consider your new venture's business model because it you many options to choose from and it is difficult to change your business model later.
True
Lifetime value of a customer can be calculated as total revenues generated by the customer over time minus the operational costs of serving the customer
True
Mapping the process to acquire a paying customer can help you identify hidden obstacles that inhibit your ability to sell your product
True
Mapping the process to acquire a paying customer can help you identify hidden obstacles that inhibit your ability to sell your product.
True
Once a new venture starts to see demand (sales) that it did not directly generate, it can switch to medium term selling processes such as distributors or value added resellers
True
One of the most important reasons to map out the process to acquire a paying customer is to understand the length of the sales cycle.
True
The best way to figure out the decision-making unit is to talk to your potential customers
True
The best way to figure out the decision-making unit is to talk to your potential customers.
True
The business model you select and implement for your venture will have a significant impact on both whether you need to raise external capital as well as how you raise external capital
True
When mapping the process to acquire a paying customer you should note whether payment will come from the customer's yearly operating budget or from the customer's long-term capital budget
True
Which business model sells products at a very low margin but incorporated high-margin add-on products
Upsell with high-margin products
Which business model charges customer for the products or services actually used or consumed
Usage-based
In Disciplined Entrepreneurship, a "customer" is not always just a customer. Which of the following is an example of a more complex customer situation?
When you have a two-sided market where multiple target customer types are needed
Capitalism is not allocation it is..
creation
In the video "Principles of Lean," Steve Blank presents a three-step process for the Lean Startup, including each of the following stages EXCEPT:
establish clear goals
One of the major advantages of crowdfunding is that a successful fundraising campaign (for example, on KickStarter) requires nothing more than a brief description of the product idea-- the platform takes care of generating a web-savvy pitch to potential investors.
false
According to the Art of Startups by Bhide, most startups should build a team by:
finding less-experienced people who want to build skills and capabilities.
In the video "To Raise Money or Not Part 2, the speaker explains that a key reason they chose to raise venture capital was:
having the VC as an investor added credibility to their sales pitch to the companies they were targeting as customers.
In the video on "Debunking the Myths of Entrepreneurship," Eric Ries argues that what distinguishes successful ventures is:
pivoting from bad ideas to opportunities that have good product-market fit.
In her video on bootstrapping, Heidi Roizen comments that bootstrapping is especially valuable because:
the best assurance that you're going to create shareholder value and have a successful business is to create profit.
Hayek argued that knowledge of time and place is more important than scientific knowledge in The Use of Knowledge in Society paper.
true
In the 'Fake It- Chapter 13' reading from "Sprint," creating a facade of a product can quickly get you 90% of the way to something that you can test with customers.
true
In the Lean Startup framework, the products a start-up builds are really just experiments.
true
Mapping your sales process strategy requires matching specific sales activities at each stage (short term, medium term, and long term) with the specific type of customer (or segment) you expect to reach with that activity.
true
One of the major advantages of crowdfunding is that it allows the entrepreneur to gauge the market's willingness to pre-order a product like a board game, which is a potential indication of whether the product could be a commercial success..
true
The difference between the lean startup "MVP" (minimum viable product) and Disciplined Entrepreneurships "MVBP" (minimum viable business product) is that the MVP only requires a product that tests specific assumptions about the venture.
true
Valuation of an early stage company is usually at least as much art as science.
true
Venture capital firms are primarily driven by financial returns; angel investors may have a personal interest in a specific technology or venture in addition to wanting a financial return.
true
When identifying key assumptions about your venture, you should carefully review your "next 10 customers" list.
true
According to the 'Fake It- Chapter 13' reading from "Sprint," it's not a good idea to invest a lot of time in untested product development because:
you'll become attached to the product and unable to take negative test results to heart.