1. Business Simulation Games SimVenture accompanying material
ELIOS Lab
Business Simulation Games SimVenture accompanying material
Prof. Alessandro De Gloria ELIOS Lab - Dynatech – Univ. Genoa

2. Sales and market Operation Organization Finance Research
4 main areas
Sales and market
Research
Market
Competition
Customer feedback
Marketing strategy
Target segment
Selling points
Marketing promotions
Sales strategy
Pricing
Sales channels
Customer support
Operation
Organization
Finance

3. Basic, fundamental questions:
Research
Research is necessary to make good business decisions, in particular for a start-up
Basic, fundamental questions:
How would you best describe the people who are most likely to buy your product or service?
What do you want to know from these people that will make it easier to sell your product or service to them?
How should you engage people so that you gather the information you need
Repeat this exercise if you have more than one market to aim at
Tip: don't conduct research with friends and relatives! Be objective!

4. Qualitative methods Quantitative methods
Research
Qualitative methods
In-depth testing of prototypes
Small numbers of testers (5-10), longer interaction
Quantitative methods
Extensive surveys (huge numbers and statistics)
Possible questions:
Price; product impressions; competitors; values; buying habits; location and access; important features; communication with the market etc.
You are wise to work with a business advisor with appropriate experience or you can buy books on the subject.
The Market Research Society's website at provides a wealth of invaluable data and advice.

5. 2- Competition research 3- Customer feedback
1- Market research
2- Competition research
3- Customer feedback

6. It is common to consider everyone as a potential customer
1- Market research
It is common to consider everyone as a potential customer
But this approach fails because specific meaningful messages cannot be targeted at specific people
By doing some research and segmenting your market you can tailor promotional activities and focus on one group to sell to
This process is called MARKETING

7. Market research – key considerations
What factors can be used to identify segments?
Location, buying power, product needs
Customers: social status, sex, age, interests
What is the target?
What are the common characteristics? What are they looking for in a product? How many are they and where are they located? How can they be reached? What do they read/watch? How much are they prepared to pay?
How can you use this info?
Identify the segments. Choose the best one to target. Make sure your product meets the specific needs (tailor your product)
How to get this info?
Research agencies, but they may be too expensive for a start-up
Do it by yourself. Thinking

8. 2- Competition research
If you have a good product, but your competitor has a better one…
You need to know as much as possible about your competitors to give you the best chance in the market
Avoiding strong competition will improve your chances

9. Competition research – key considerations
What do you need to know about your competitors?
What are the strength and weaknesses of their products
How much do they charge
How do they market
What share of the market do they have
How to get this info?
Publicly available resources
Friends
Pay a research company
How can you use this info?
Find the gap in the market
Your product needs to be unique in the marketplace
You must differentiate from the competitors
You need to satisfy the customers’ needs
Define your prices based on the competitors
Set sale targets

10. You must listen your customers
2- Customer feedback
You must listen your customers
Creating an effective questionnaire is not easy
Asking wrong questions
Badly interpreting the answers

11. Customer feedback – key considerations
What do you need to know from your customers?
What do they think of your product? Strength and weaknesses? What would they like to change? Where did they hear about your company? What do they think of your competitors? What advertising media do they see? How often do they buy and how much do they spend?
How can you use this info?
Refine your product
Improve market strategy
Plan for the future by understanding your customers’ buying patterns
Anticipate threats by competitors and exploit opportunities
Choose the right price
How to get this info?
Pay a research company
Ask people to complete a questionnaire
Invite people to an event and get their feedback
Internet/phone

12. 3- Marketing promotions
Marketing strategy
1- Target segment
2- Selling points
3- Marketing promotions

13. Choose the target market for your marketing campaign
1- Target segment
Choose the target market for your marketing campaign
Exploit your market research data
Key considerations
What do customers want?
Product design, selling points should follow from this
What price will they pay?
Size of the potential market?
To help forecast sales and understand cash movements
How to reach them?
Competitors in the segment?
It’s better to find a niche…

14. Selling points (or Unique Selling Propositions) What candidates?
To persuade people to buy your product you must communicate clearly the benefits of making the purchase
Selling points (or Unique Selling Propositions)
What candidates?
Quality, performance, features, price
Delivery, methods of payment
Company experience
Choice criteria?
Depends on the target audience
Exploit customer feedback
How many points?
Trade-off between accuracy and effectiveness
The more you differentiate, the more you stand out from competition, but you may reduce the impact of your message (customers are more likely to read short and simple messages)

15. 3- Marketing promotions
Communicate what you offer to your potential customers
Key considerations
How much does the promotion cost?
Who will it reach?
Aim at the right target
How effective is the message?
Good presentation
Timeliness
When will they have effect?
How often can it be repeated
Also message reinforced (e.g., phone call after an )

16. Sales strategy
1- Pricing
2- Sales channels
3- Customer support

17. Make profit and attract customers
1- Pricing
Make profit and attract customers
If necessary use sale promotions and discounts
What is the lowest price you can afford?
The cost of producing each unit of product
But you have also to consider the fixed costs in the business
What is the highest price your customers might pay?
The higher your price, the more potential customers you exclude
What are your competitors’ prices?
How does the pricing affect the customers’ perception of your product?
Lower prices could be perceived as lower quality
Use of sale promotions?
Number of sales could be more important than the profit, sometimes, for short periods
Sell off old stock, increase market share, counter a competitor’s promotion

18. Choose the best way to get your product out into the market
2- Sales channels
Choose the best way to get your product out into the market
How much does it cost?
Set-up (overhead) and implementation (cost of sale)
Time and effort needed?
How much of the selling price will you get?
Consider also possible cost reductions or revenue increase
What channels do your potential customers normally use?
What channels are open to you?
A major distributor will consider only referenced products
Shop retail works with the right premises

19. If you want to retain your customers and avoid bad reputation..
3- Customer support
If you want to retain your customers and avoid bad reputation..
Key considerations
What type of support do they need
Installation, failuers
When is help needed and for how long?
Can you charge extra?
Adding value like this is a common practice
Reputation will suffer if you say that support is a selling point and it does not work well
Can you help customers to help themselves?
Forums, knolwedge databases, good documentation

20. Area 2 - Operations
Product design
Purchasing
Production
Quality

21. Give customers what they want
Product design
Give customers what they want
Choose the right mix of product attributes whilst keeping costs down
What do your customers want?
Market research
How long does it take to design?
You need to predict where your business will be when the design is complete
How much does it cost?
Giving customers what they want makes no sense if the production costs make a loss
What else will be affected by a redesign
Impact on sales, marketing, support and packaging
Other issues
How often redesign?

22. Find the right supplier How much do you have to pay? Payment terms
Purchasing
Find the right supplier
How much do you have to pay?
Payment terms
E.g., credit terms (avoid paying before you are paid by the customer)
Good relationships
Reliability: right goods, time, quality
Discount for bulk buying

23. How to produce How much stock to keep? How many to produce?
Production
How to produce
How much stock to keep?
Less delay in availability
Ties up vital cash that might be needed elsewhere
How many to produce?
Batch production
Efficiency +
May not fit your orders -
Keep stock -
Bulk buying +
Who produces?
Outsourcing?
Make on your own may make it easier to satisfy orders promptly

24. Monitor your products’ reliability to attain a high level of quality
Check your product/service to identify defects before supplying to the customer
Prevent faulty products going out the door
Bad reputation
Highlight problems in the production process which causes such failures
How is it done?
Random testing
Check a proportion
Inspection
Visual check for obvious damages
Soak testing
Extensive time for every product

25. Create a stable platform for your business to flourish
Area 3 - Organization
Create a stable platform for your business to flourish
Typically, long-term decisions
Weigh up your options carefully
For a small business, staying flexible is often the most important principle
3 sub-areas
Premises
People
Legal

26. Get the best mix of space, location, facilities and value
Premises
Get the best mix of space, location, facilities and value
Equip with the resources
Choose the services you need

27. Facilities included in the price
1- Location
Try to ensure your premises project an image that is consistent with your product
Spaces:
Storage, receprion, rest areas, services
Where:
A good location may expose you to many more potential customers, portray a stronger image
Too far places may deter them
What terms?
Lease is good to spare cash, but you may have limitations in extension and use
Facilities included in the price
A lot of services needed for a start-up (e.g., receptionist, photocopiers, etc.)
Managed premises may provide these for a fixed cost
Effects of relocation?

28. What effect on your business? How to pay?
2- Resources
What?
Equipment
Furniture
Transport
Tools
What effect on your business?
How to pay?
Equipment can be hired
Vehicles can be paid for over a period of time
This costs you more, in the long-term

29. People
1- Business owner
40 hours usally. But a business owner may take much more (80)
What are the risks of working too hard?
Stress
Demotivation
Less effectiveness
Ill health
Family/social life affected
Be conservative: assume you need more than less
Make sure you achieve your earning target

30. How much time will be lost? How many people need the training?
How much does it cost?
Usually, the more you pay, the quicker you learn (not always true)
How long does it take?
Make decisions that meet the needs of your business
How much time will be lost?
DVD-Course, vs. real teacher
How many people need the training?
Where and when?
Near your premises is more effective

31. How to find perspective candidates? Who do you interview?
Recruitment
How to find perspective candidates?
Own advertising vs. agency advertising
Who do you interview?
An agency may filter better through CV scouting (not everything in a CV is as it seems)
Interview
Skills, background, aspirations and personality
Check the CV
Sell them the job, giving info and answering questions
What can you offer them?
Not only money
Career path, training in new skills, flexible hours, autonomy

32. Allocate responsibilities to your staff
Management
Allocate responsibilities to your staff
Primary, secondary, reserve, never
Tasks:
Design, recruitment, training, finance, sales, marketing, etc.
Staff skills:
Production, writing, research, business mgmt, marketing, sales, etc.

33. Set up a Limited Company Health & safety
Legal
Set up a Limited Company
You can start without, but you’ll need quite soon
Health & safety
Undertake a risk assessment of your premises
Check all H&S issues are considered
Contract law
To provide to customers
Also to protect you
Employment law
Pay, disipline, hours of work, maternity,time off-work etc.
Use a professional to have advice and guidance

34. Finance
Raising money
Banking
Forecasting
Accounting
Credit Control

35. What flexibility do you need? How much do you need?
Raising money
Bank loans
Decision parameters
Amount
Period
Interests
Can you offer security?
The process of arranging the loan will be much smoother…
What flexibility do you need?
Close earlier, take a payment holiday…
How much do you need?
Borrow enough at the start…
How long do you need?
The longer you take to pay back the loan, the more interests you will pay

36. Do you all understand the risk?
Raising money
Friends and family
The same parameters as for a bank
Do you all understand the risk?

37. Raising money
Bank overdraft
Aimed for you to handle short-term borrowing needs (while loans are more for long-term)
A business-plan needs to be presented with a realistic forecast of future sales, costs, thus profits
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the negative balance exceeds the agreed terms, additional fees may be charged.

38. Selling equity (shares) What is the company worth?
Raising money
Selling equity (shares)
What is the company worth?
How much are you willing to give away?
Some investors want to be involved in the running of the business
They may bring vital skills you don’t have
Investors are here to make money
What do you offer them?
How to find investors?
Networks of business angels are specialized in very small businesses

39. What can they be used for?
Raising money
Grants
Many companies are not aware of the aid that is available to help them get off the ground…
Qualifications
Typically: new businesses, the young, disadvantaged areas
Who offers grants?
Government agencies, charitable organizations
What can they be used for?
Normally they are specificaklly purposed: training, R&D
Application process can be lengthy and with no guarantee of success

40. Set up a bank account Costs Why needed? Fixed or variable
Banking
Set up a bank account
Why needed?
To pay and get paid
Earn interests (vs. inflation)
To get an overdraft – short-term borrowing – or loans
Costs
Fixed or variable

41. Forecasting
Predict future activity in order to anticipate problems before they occur
It’s better to make a series of educated guesses
Sales targets
Estimate future sales, based on research
Budgets
Estimate costs for different areas of your business
Profit forecast
Total sales for the predicted period minus production and fixed costs
Cashflow forecast
Similar to profit/loss, but calculations are based on when money changes hands

42. Forecasting
Predict future activity in order to anticipate problems before they occur
It’s better to make a series of educated guesses
Sales targets
Estimate future sales, based on research
Budgets
Estimate costs for different areas of your business
Profit forecast
Total sales for the predicted period minus production and fixed costs
Cashflow forecast
Similar to profit/loss, but calculations are based on when money changes hands

43. Necessary to generate a profit or cashflow forecast
Sales targets
Necessary to generate a profit or cashflow forecast
You can anticipate problems and correct them before they become critical
Not easy.. The more established you are, the easier it becomes, as you can exploit historical data
Without them, you can use research and marketing/sales strategies. Better to be conservative…
Review the targets against actual results, in order to update the forecasts and see whether you need to change the sales activity

44. Fixed and variable costs (depending on production)
Budgets
Estimate your future spending in the main categories of expenditure over forthcoming months
It is wise to add a little bit of contingency to each expenditure category for unforeseen expenditures
Necessary for financial forecasts (profitability and cashflow) and to check if you are spending too much
Fixed and variable costs (depending on production)
Frequent checks. If you spend too much, try and reduce your spending or update the prediction figures

45. If the forecast profit is low, you need to improve the situation
Profit & Loss forecast
Compare predictions for income and expenditure (diffeerent categories of costs) over a period of several months
It is not concerned when the payment is made, only when the cost was incurred
Profitability is needed for a business to survive. You cannot make continual losses
If the forecast profit is low, you need to improve the situation
Remember that profitability is meaningful only over the long-term. So, watch the trend over 6 months to 1 year

46. Perhaps the biggest problem that faces a small business
Cashflow forecast
Perhaps the biggest problem that faces a small business
You may be well in profit and still fail because you run out of your most precious resource: money
A monthly estimate of how money will enter and leave your bank account
Prediction is a vital exercise that needs to be done regularly
You should avoid below 0 (or agreed overdraft limit). Check when you can make bonuses or investments

47. Accounts
Bookkeeping
Record your business transactions to provide the raw data for accounts
“Double entry” “Partita doppia” because each payment is entered twice, once for the category and once for the account affected

48. When the money changes hands is not considered
Accounts
Profit & loss report
Review the profit made by the company to determine how successful it is
When the money changes hands is not considered
If a sale is agreed or a cost incurred in that month, it is duly reported
Some things do not affect profit
Loans or equity inputs to the business
Repayments on loans (except interest)
Only affect balance sheet and cashflow
Compare the profit report with the profit forecast and adjust forecasts accordingly

49. What can you learn from the cashflow report?
Accounts
Cashflow
Movement of cash in and out of your business
When money changes hands, rather than when the cost is incurred
This becomes an issue when custmers pay an account (payment after days)
When you run out of money, the company cannot operate and you will be out of business
This is why forecasting is essential
What can you learn from the cashflow report?
The effect of late payers, how much you might need to borrow, seasonal variations, causes of big cashflow swing

50. Amount owed to creditors
Accounts
Balance sheet
Measure the value of the company’s tangible assets and liabilities (attivo e passivo)
It takes no account of intangible assets like brands and future earnings
Amount owed to creditors
Value of asssets can be used by lenders and investors before putting money into the business
The final figure does not represent the worth (market value) of a company – this would involve also potential future performance

51. Long-term liabilities
Accounts
Balance sheet
Combination of long term and short term assets
Fixed assets
Equipment. Take the purchase price and depreciate them among each year
Current assets
Total money owed to the business (debtors), cash in the bank, value of stock on hand
Current liabilities
Anything outstanding to your suppliers (creditors)
Long-term liabilities
Value of any loans outstanding

52. Other financial measurements
Assess the health of your business in a variety of ways
Return on Capital employed
Current assets (cash, debtors, stock) / current liabilities (creditors, overdrafts)
Liquidity of a company. Should be around 1.5. Below 1 is in danger
Current ratio
Net profit / capital employed x 100%
Profitability: should be higher than savings accounts
Gearing
Long term loans / capital employed x 100%
A measure of risk for an investor
Asset turnover
Sales turnover / net assets
Volume di affari. A measure of how well the company’s assets are being used to generate sales

53. Monitor customers who owe money and adopt a strategy for late payment
Credit control
Monitor customers who owe money and adopt a strategy for late payment
Is your debtor even aware of being late?
Being understanding (of your debtor needs) might be a good choice
Start slowly and politely, and gradually ramp up the pressure
Is the payment worth chasing?
A company that has no money is unlikely to pay you
Possible choices?
Mail, phone call, threaten legal action, debt collection agency