Tag Archives: Business Strategy

Cost-of-Sale-Calculator.xlsx

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This spreadsheet provides two models for calculating the cost of sale for a revenue channel of a business.

The first model calculates costs through Contriubtion Margin.  It starts with an estimate of the lifetime value of a customer.  Next, Cost of Goods Sold and Marketing Acquisition Cost are subtracted out.  Then, the Sales Cost and Account Management costs are subtracted out.  Each of these cells reference other tabs itemizing costs such as salary, commission, benefits, software licenses, office space cost, etc. 

The sales cost is estimated by taking all of these costs and multiplying them across the number of sales people, then dividing it by the number of deals they close in a given month. This provides the cost per deal.

The account management cost (or client services cost) is calculated by taking the similar costs and breaking it down to an hourly rate for the account manager.  This is multiplied by the number of hours the account manager spends on a given account throughout the average life of an account to provide a cost per account.

The net of this model provides amount that is contributed back to the business (contribution margin) from this particular revenue channel.

The other model provides net margin per deal.  It also starts with the average lifetime value of the account and subtracts out COGS and marketing acquisition cost.  Then, instead of subtracting itemized sales and account management costs, it subtracts out the company Operating Expense (OpEx), as a percent of revenue.  Using this model, it is subtracting out operating costs associated with the entire company instead of just the revenue channel generating the revenue. The result is net profit per new account signed expressed in both dollars and as a percent of revenue.

Porters-Five-Forces-Example.pptx

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Porters Five Forces is a model used for analyzing the competitive environment of an industry.  This Porters Five Forces Example is for the PC Industry (personal computer) in 2008.  The five forces in Porter's model are:

  • Industry Competition/Rivalry – most notably identified by the level of price competition and product introductions.  
  • Suppliers – exert power by raising prices or making switching costs high.  Suppliers are most powerful when there are only a few key players.
  • Buyers – exert power by forcing prices down.  Buyers are most powerful when they are the primary customer for a company or when the product they are purchasing is a commodity.  
  • Potential Entrants – the threat of potential entrants is highest when there are no significant barriers to entry into the industry.  High profits attract new entrants to the industry.
  • Substitutes – The threat of substitutes is a concern when a new product or service might meet the same need better, faster or cheaper.  

The first slide in this Porters Five Forces example highlights the strength of each force in the PC Industry by the color of the box.  Red represents a strong force, orange a medium force, and green a weak force.  The comments on the slide describe the analysis in more detail.  

The second slide illustrates recommended strategies for a firm competing in the 2008 PC industry with the given competitive environment.  Strategies are indicated in blue, and expected benefits of the strategy are indicated in the lighter blue color.  Further analysis is described in the comments of the slide.  

Porters Five Forces analysis was initially introduced by Michael Porter of Harvard Business School in 1979.  It can be used to assess the attractiveness of an industry, as well as identify and develop business strategies for existing players.  This analysis in this example is intended for an existing player in the 2008 PC Industry.  

SWOT-Analysis.pptx

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What is SWOT? SWOT stands for:

  • Strengths (internal to the organization) – what the organization does well, core competencies, etc.
  • Weaknesses (internal to the organization) – what the organization does not do well.
  • Opportunities (external to the organization) – favorable trends in the industry
  • Threats (external to the organization) – unfavorable trends in the industry

A SWOT Analysis facilitates the development of organizational strategies based on the organization’s conditions and it’s industry conditions. It is not considered a thorough analysis.

Upon identifying the strengths, weaknesses, opportunities and threats, one can identify strategies for the organization that ideally address more than one SWOT item. ¬†For example, a strength in “low-cost manufacturing” and an opportunity of “increasing demand for low end electronics” may lead to a strategy of new product development for certain low end electronics items.

The first page of the powerpoint template is the SWOT diagram which can easily be populated for your organization. The second page is to document the business strategies identified through the SWOT analysis, grouped according to which two SWOT components are being addressed.