4 Business Considerations
Section Overview
| Duration | Slides | Materials | Key Points |
|---|---|---|---|
| 210 min | Section 2 | Case Study information, New business video, NBS BMC | Finding customers, understanding the market and providing value |
This section is the longest section of the Explorer Training Programme. It is essentially a crash course in business in which your participants will learn the basics of how to run a business. You will have to introduce a lot of new terms and explain them in depth before letting everybody try to use them in various exercises. Make sure to adapt the pace of the workshop to your audience.
The goal of the Restoration Explorer is to start businesses that can use private capital to protect and improve nature. That means the businesses need to be viable. This section covers the basics of how to achieve this.
4.1 Starting a new business
The video introduces a lot of new terms and even a tool: The Business Model Canvas. Group Exercise A version, specially designed for Nature Based Solutions, exists as well. The important difference to the general Canvas is that it starts with the business model instead of with the financial flow, broadens the value proposition to more stakeholders, and helps bridge the communication gap between conservation and finance.
As you will notice, while the training takes a lot of inspiration from these tools, it does not follow them strictly. Please feel free to provide your participants with the canvases linked above, but remind them that it is not necessary for this training.
4.1.1 Enter an existing market or create a new product?
This training covers two main strategies for creating a new business. Creating a new product and entering an existing market. Neither is inherently better than the other. So the goal is to collect and work out some pros and cons of each approach. Before revealing the answers, it can be a nice interaction to let your participants think for a second and then name a few pros and cons in the group.
This question sets up the following topics. At the end of the business section, you will revisit the question if participants should enter a market. By then the participants should be equipped to carry out a first comparative analysis to help their decision.
4.2 Business Purpose
Present the questions on the slide and then give sufficient time for your participants to think about their businesses. While their are no perfect answers, try to make sure that the answers are as detailed as possible. The clearer the answers are to the participants of the Restoration Explorer, the better they can communicate them with stakeholders.
4.3 Target Customers and Willingness to Pay
One of the most difficult parts of building a business is finding customers and determining what they should pay for what the business is selling.
4.3.1 Identifying your Customers
To support participants in finding their customers give everybody 15 minutes of time to answer the questions on the slide. Based on experience, it helps to have your participants discuss their answers with others either in pairs of small groups, to ensure that all questions are answered. Then run through the case study to show how an existing business identified its customers.
4.3.2 Willingness to Pay
Getting the price right is one of the most difficult aspects of running a business. Many different strategies exist to determine how much a business should charge for its products and services, here the slide notes introduce three of the most available options:
- Research the competition
- Research customers
- Survey customers
The categories of pricing shows what different price levels signal to customers.
4.4 Value Proposition
Pricing needs to correspond with the value proposition of a business’ products and services.
The slide shows a section inspired by the Business Model Canvas. On the left, in the box, are Products & Services, Gain Creators and Pain Relievers. This is what the business provides. In the circle on the right, is the customer profile. It contains what the identified target customer experiences: the jobs, pains and gains. Jobs are things the target customer would like to do, or has to do. They include not only work related task, but might even include hopes and wishes such as: being able to relax in a natural environment with friends and family. Pains refer to undesirable outcomes that customers seek to avoid, such as dissatisfaction with existing solutions, frustrations, obstacles, or risks encountered when attempting to accomplish a task. Lastly, gains represent the indicators of success for customers in accomplishing a job well-done. These gains encompass positive outcomes, tangible results, benefits, and aspirations that customers aspire to achieve. This map becomes clearer the more one learns about ones customer.
Getting the fit right between how a business’ products and services create gain and relieve pain for customers and how customers experience pains and gains related to their jobs is possibly the central challenge. Without a strong product-market fit, it will be difficult to grow a business. Creating product-market fit is not a one-and-done affair either. Instead, as the products and services or the customers of a business change, so will the fit between product and market. Ensuring a strong value proposition is therefore a recurring exercise for any entrepreneur, the more they learn about their offers and their customers, the better they will be able to formulate and communicate a their value proposition.
Sources for insight into the target customer come from research into existing customers of competitors or from research about customers in new market segments that are yet to be created.
The example slide shows how to identify pains and gains the target customer experiences from existing solutions and the entrepreneurs offering.
The slides “Customer’s Pains and Gains” needs to be tailored with a custom case study.
The section on value propositions closes with an exercise where trainees fill in their own problem solution fit.
4.5 Potential Market Size of the Product
How successful can a business expect to become? A key aspect in this question is the potential market size.
There are two types of market size that need to be calculated, along with your projected share in the market. The first type is the total addressable market (TAM), which essentially determines whether the potential market for your business is sufficiently large. It represents the number of customers or the amount of revenue you could generate if your business achieved a 100% success rate and managed to sell to every potential customer. For simplicity, TAM will also be referred to as the total number of potential customers. The second type is the target or available market, which denotes the realistic size of the market that your business can realistically reach. This can also be referred to as the Serviceable Addressable Market (SAM).
4.5.1 Calculating Market Size
To calculate the market size a business needs to go through four steps.
- Define the target audience
- Research the market size
- Assess the potential value
- Estimate total market demand.
The slide notes explain each step in detail.
To calculate the market size two formulas exist:
\[ \begin{split} \text{Market Size or Volume} = \\ \text{Number of Target Users} \times \text{Expected Purchases During Period} \end{split} \]
and \[\text{Market Value} = \text{Market Volume} \times \text{Average Value}\]
The example slide for “Market Size Exercise” needs to be tailored with a case study fitting your context.
4.5.2 Market Testing and Developing a Prototype
To systematically assess how viable your product or service is a business needs to test its ideas with real world feedback.
Two ways of doing this are through Prototypes and/or Minimum Viable Products.
On the two slides corresponding to prototypes and minimum viable products their characteristics and benefits are introduced.
4.6 Comparative Analysis
Now that participants understand how to conduct a market sizing analysis, we will use comparative analysis to assess the factors to consider when deciding to enter the market with a new product or enter an existing market with a more sustainable product that already exists. A comparative analysis is used in business strategy to evaluate different aspects of a business or its environment. It involves analyzing and contrasting multiple factors or variables to gain insights and make informed decisions that benefit both the company and its customers.
The slide “Should you enter a market?” and its notes cover the steps of this analysis.
4.7 Promotion Strategies and Pricing
The best products and the best market fail if nobody knows about the offer or if the price is set incorrectly. How to best achieve the right promotion and pricing strategy are ongoing topics and a business constantly needs to evaluate that their chosen strategies work. The start to a coherent marketing strategy are the four Ps:
Product
Presentation or Product defines the characteristics of the product or service (e.g. quality, labelling or packaging). Further, the characteristics also include the differentiation and added value compared to the competition.
Price
The Price describes the value of a product or service. It should be linked to the product’s perceived value while considering supply costs, seasonal discounts, competitors’ prices, and retail.It has a crucial impact on the success of the product as it gives an immediate signal to the consumer. Setting the price too high or too low, it will fail to reach the target audience. Further, positioning the product on the price scale can define perceived quality standards that are connected to the price – for example, high priced products are usually perceived as better quality. Additionally, knowing the willingness to pay of the target consumers but also the price in an existing market is useful. Finally, the price is the only of the 4Ps that is flexible and possible to be changed immediately.
Place
Place involves identifying the best stores or online platforms that stock products like yours for your target consumers (e.g. wholesale, retail, online). Including the product in an existing store, it is important to choose the one where the target audience goes. Choosing the right place has also an influence on logistics and transportation of the product.
Promotion
Promotion describes the actions to reach and enter the market to become visible for new consumers. It includes advertising, public relations, and other media strategies that communicate the product’s appeal to the target consumers. Again, knowing how to reach the target audience is important to choose the right way of promotion. For example, if the target audience is likely to use social media, this might be a suitable promotion platform.
4.8 Stakeholder Mapping
While stakeholder matter for any business, for restoration focused enterprises they are especially important.
The slide “Stakeholder Mapping” shows four types of relevant stakeholders.
- The section on stakeholders in the social and governance section (Section 6.1)
4.8.1 How to How to Prioritize Stakeholders
Not all stakeholder need the same amount of attention at all times. Prioritizing between different stakeholders is an important task for any business. The stakeholder power matrix is a useful framework for this task and explained in detail in the notes to the slide “How to Prioritize Stakeholders”.