SimVenture topics

Business Simulation Games
SimVenture accompanying material
Prof. Alessandro De Gloria
ELIOS Lab - Dynatech – Univ. Genoa
eSG Erasmus Project
SimVenture deployment
4 main areas
Sales and market
 Market
 Competition
 Customer feedback
Marketing strategy
 Target segment
 Selling points
 Marketing promotions
Sales strategy
 Pricing
 Sales channels
 Customer support
SimVenture deployment
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
Tip: don't conduct research with friends and relatives! Be
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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.
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1- Market research
2- Competition research
3- Customer feedback
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SimVenture deployment
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
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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
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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
Avoiding strong competition will improve your chances
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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
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
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Set sale targets
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2- Customer feedback
You must listen your customers
Creating an effective questionnaire is not
Asking wrong questions
Badly interpreting the answers
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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
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
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Marketing strategy
1- Target segment
2- Selling points
3- Marketing promotions
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SimVenture deployment
1- Target segment
Choose the target market for your marketing
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…
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2- Selling points
To persuade people to buy your product you must
communicate clearly the benefits of making the
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
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SimVenture deployment
(customers are more likely to read short and simple messages)
3- Marketing promotions
Communicate what you offer to your potential
Key considerations
How much does the promotion cost?
Who will it reach?
 Aim at the right target
How effective is the message?
 Good presentation
 When will they have effect?
How often can it be repeated
 Also message reinforced (e.g., phone call after an email)
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Sales strategy
1- Pricing
2- Sales channels
3- Customer support
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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
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
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2- Sales channels
Choose the best way to get your product out into the
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
What channels are open to you?
A major distributor will consider only referenced products
Shop retail works with the right premises
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3- Customer support
If you want to retain your customers and avoid bad
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
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Area 2 - Operations
Product design
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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
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How often redesign?
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
Good relationships
Reliability: right goods, time, quality
Discount for bulk buying
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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?
 Make on your own may make it easier to satisfy orders
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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
 Visual check for obvious damages
Soak testing
 Extensive time for every product
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Area 3 - Organization
Create a stable platform for your business to
Typically, long-term decisions
Weigh up your options carefully
For a small business, staying flexible is often
the most important principle
3 sub-areas
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Get the best mix of space, location, facilities
and value
Equip with the resources
Choose the services you need
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SimVenture deployment
1- Location
Try to ensure your premises project an image that is consistent
with your product
Storage, receprion, rest areas, services
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?
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2- Resources
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
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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
Make sure you achieve your earning target
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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
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
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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)
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
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Allocate responsibilities to your staff
Primary, secondary, reserve, never
Design, recruitment, training, finance, sales,
marketing, etc.
Staff skills:
Production, writing, research, business mgmt,
marketing, sales, etc.
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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 offwork etc.
Use a professional to have advice and guidance
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Raising money
Credit Control
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Raising money
Bank loans
Decision parameters
 Amount
 Period
 Interests
Can you offer security?
The process of arranging the loan will be much
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?
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Raising money
Friends and family
The same parameters as for a bank
Do you all understand the risk?
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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.
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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
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Raising money
Many companies are not aware of the aid that
is available to help them get off the ground…
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,
Application process can be lengthy and with no
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of success
Set up a bank account
Why needed?
To pay and get paid
Earn interests (vs. inflation)
To get an overdraft – short-term borrowing – or
Fixed or variable
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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
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
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when money changes hands
SimVenture deployment
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
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
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when money changes hands
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Sales targets
Necessary to generate a profit or cashflow
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
Without them, you can use research and
marketing/sales strategies. Better to be
Review the targets against actual results, in
order to update the forecasts and see whether
you need to change the sales activity
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Estimate your future spending in the main
categories of expenditure over forthcoming
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
Frequent checks. If you spend too much, try
and reduce your spending or update the
prediction figures
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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
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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
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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
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Profit & loss report
Review the profit made by the company to
determine how successful it is
When the money changes hands is not
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
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Movement of cash in and out of your business
 When money changes hands, rather than when the cost is
 This becomes an issue when custmers pay an account
(payment after 7-30-60-90 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
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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
The final figure does not represent the worth
(market value) of a company – this would
involve also potential future performance
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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
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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
Current ratio
Net profit / capital employed x 100%
 Profitability: should be higher than savings accounts
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
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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
Possible choices?
Mail, phone call, threaten legal action, debt
collection agency
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