_business dynamics simulator (ssovilj) v2016.7
TRANSCRIPT
Siniša Sovilj, PhDJuraj Dobrila University of Pula,
CROATIA
Business SimulationEnvironment:
A Case Study for Business Schools and Startup Accelerators
The 34th International Conference of the System DynamicsSociety, July 17 – July 21, 2016, Delft, Netherlands
AboutThe purpose of Business Simulation Environmentto help future entrepreneurs:
• (A) design 5-years pro-forma financial statements for rapid business plan creation• (B) simulate strategic decisions to improve survival rate and support growth,• (C) produce fundamental analysis and company/idea valuation,• (D) foster entrepreneurial education, training & research,
in risk-free, enjoyable, realistic and interactive simulation environment.
new companies / yr
10,000 Croatia3.2 M EU3.0 M US
Problem-Solution Fits
#1 Learning Environment for EntrepreneurialTraining/Education/Research
#2 Rapid Business Plan Creation System#3 Budgeting & Testing Future
Business Idea Viability
Original SD model
Customer baseNew customers
Loss rate
StaffHiring staff Leaving staff
Revenue
Marketing budget
Total Staff costs
+
-HiringbudgetR1
Customerrecommendation +
+
Staff lossrate
++
Service inprocess
Service completed
Profit+
R2
Total operatingcosts
-
Assets
R3
Product inprocess
Total productioncosts
+
Total servicerevenue
Total productrevenue
Cashavailable
Cash out
+
+
Potentialcustomers Staff needed
+
-
Depreciation Investment
Asset lifetime
+
+
-
+
+
+
Investmentbudget
+
+
++
+
Marketingeffectiveness
Hiring budgetper staff
+
Investmentbudget per staff
+
Companyreputation Development of
company reputation
+
Value perproduct
+
Value perservice
+
Service price
Product price
Production costper product
+
Operating costper service
+
Serviceorder rate
Productorder rate
B2
B3
B1
Staff rate forservice
Staff rate forproduct
+
Percentage ofmarketing budget
approved
+
Recommendationrate
+
Average salaryper staff
+
+Increasing potentialcustomers
+
Customer reached
+
+
Customerlosses+
+
Service orderrequired
+
+
Staff capacity II
+
+
Staff capacity I
+
+
+Product orderreceived
+
+
+
Productcompleted
+
+
+
+
+ +
Interestpaid
Interest rate
+
+Cash in+
Debt
+
Marketing costs
+
+
Private pay-off
-
New SD model
AssetsAssets
DebtDebt
EquityEquity
MarketDynamics
MarketDynamics
SupplyChainSupplyChain
ProductDevelopment
ProductDevelopment
HumanResources
HumanResources
CAPEXCAPEX OPEXOPEX
Business Model Canvas
Solution (Desktop)INPUTS: OUTPUTS:
Solution (Web)
Inputs:
SimulatorMontly Quarterly Annually
Simulation mode: one-runGamming mode: interactive forward/backward runs
Outputs:
Outputs:
Fin.Reports:
Valuation:
Example – Sensitivity Analysis
●Multivariate Monte-Carlo Simulation● Marketing effectiveness = Normal distribution (mean 5%, deviation 2.5%)● Average salary per staff = Uniform distribution (min 2000$, max 3000$)● Product Sales Price = Normal distribution (mean 30$, deviation 5$)● Cost Price per Product = Normal distribution (mean 15$, deviation 5$)
Current50% 75% 95% 100%
"Cash / Deposits Balance"2.207 M
1.907 M
1.606 M
1.305 M
1.004 M
703,614
402,892
102,169
-198,554
-499,277
-800,0000 9.6 19.2 28.8 38.4 48
Time (Month)
(1)Entrepreneurs(2)Business Consultants(3)Regional Development Agencies(4)Public Policy Makers(5)Venture Capital & Angel Investors(6)Credit Banks(7)Universities & Business Schools
7 Market Segments
LivePlan.com
Competition
How much of this product will you sell?!?
Forecast!
SimVenture.co.uk
Competition
MIT-Sloan Management
Competition
compass.co (startup genome report)Benchmark
Siniša SoviljAssistant Professor,Department of ICT,UNIVERSITY OF PULA.
The Team
Martin KuncAssociate Professor of StrategicManagement Science,WARWICK BUSINESS SCHOOL.
Zoran AralicaSenior Research Associate,Innovation ManagementTHE INSTITUTE OF ECONOMICS.
Co-authors:
Future Work
(1) open Web application
(2) dynamic pricing
(3) gamification
Case Study:Green Devil Control Systems
Company green technology for smart homes
IDEA: Founders will design, build, and offer a product(hardware) and service (software) that will allowhomeowners to control and monitor electricity usage intheir homes and deliver significant energy savings.
Three founders:(1) mechanical engineer(2) electrical engineer(3) economist
Time 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Investment Dates $ $ $ $
Value EventsStartupInitial Operating CapabilityFull Operating Capability
Proof of ConceptProof of ProductProof of MarketProof of Scale
Inital 1st Round Exit2st Round
Value Events
Fin.Reports:
Example – Company Valuation●Discounted Cash Flow
●Built Up Method:
0 (1 )
n
tt
Cash FlowPre
Discount Ratesent Value
Initial 1st Round 2nd Round Exit Valuation
Risk Free - 6% 6% 6%
Systemic - 10% 8% 2%
Unsystemic - 59% 36% 17%
Total Discount Rate - 75% 50% 25%
Valuation:
