Ballpark figures - YouTube

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Hi, I'm Nick, business designer at Board of Innovation.

Now I will explain the ballpark figures template.

This is a tool that will help you make guesstimates

or a high level calculation of your business case

very early on in the process.

You don't need Excel or any advanced calculation.

But, very early on in the process we encourage people

to just look at a couple of high level figures

to make a high level calculation at least

to get an indication of the potential

of your business model.

Way too often we see that people postpone this calculation

to very late in the process.

A couple of weeks before they need

to do the final presentation or something,

they will notice that (mumbles) jump into Excel

and only at that moment they realize they're missing

maybe a couple of million year revenues

or they see it actually can't work in a real context.

We encourage people to do this calculation very early on

so you can spot the inconsistencies or the very complex

assumptions you have to solve them very early on.

To help you out, the ballpark figures template

will zoom in on five different elements

that will give you a first indication

of the potential revenue stream

or the value of your business model.

Let me show you how it works.

For now we assume we're working on sort

of a new savings account for a financial institution.

It's linked to a specific health goals,

linked to a specific customer segment, the millennials.

How will that work for this example?

First of all we have the buyer and the user,

so who buys your offering and who will use your offering.

In this case, with our example,

we assume that our clients will be the millennials,

maybe millennials without children in an urban environment.

And so it's important to zoom in

on very specific numbers here.

Let's say one of our segments will be focusing on France,

so for this specific target audience,

let's say there are five million people

that fit that criteria.

A group of five million people here.

For this example, we can look at the buyer and the user,

are they the same or not?

In this case, they would be the same.

The person who would buy the service

or start using the service,

the person will buy the service

will also use the service himself.

While there are some business models

where it's not the same.

You could have a service where you're actually

selling to the parents and the kids

would actually use the service.

It depends on whether they'll be doing a business model

so sometimes you need to make

a distinction between those two clusters.

In this case, it will be the same.

Now the third component, frequency,

how often will they use your tool,

how often will they buy your tool

or buy additional upgrades.

Depends on the business model.

For our example, we assume that we just sell it once,

at least we convince people to sign up once,

and depending on their health goals

that they set themselves,

they might the service two or three times per week.

It's a high frequency product,

it's just not something you buy just once a year

and you leave it there.

You might even use it a couple of times per week.

It might have an impact on how you make money in the end.

And the fourth component, it's the potential,

the potential of this client market and this client segment.

How many people can you convince

to sign up from this bigger segment?

For our example, we assume that maybe over time,

with the assets that we have available and the resources

that we have available,

that we can convince maybe 2-5% of this client market,

so up to 5%.

And then the last component,

how will we capture value?

Maybe this links to pricing or maybe how you want

to reduce costs over time.

This component, for our example,

let's say with this financial institution in mind

we can look at a lifetime value of a customer,

so in this case could be around a thousand euro

that maybe we can increase,

maybe we can gain additional clients, by using the service,

we can maybe convince an extra client segment

to sign up for the service and maybe also start

using additional services of this financial institution,

let's say about 20% of clients per country, we add on top.

And maybe people become more loyal to the overall service,

so there will be less churn,

maybe 10% less churn or something.

We can explore different options here,

how you want to capture that value in the end.

If you combine all different elements,

you will see how everything will be translated

in a first guesstimate on the revenue stream.

Let's show you how that could work,

just to illustrate.

Let's focus on France here for a moment

where we have marked five million people

that we have as a bigger target group.

We assume that we can convince 5% of that target market

to sign up over time, so that will 250,000 people.

We also said that within that group,

20% of them will be totally new clients

for this financial institution,

and also we know that for every new client,

we have a lifetime value of around a thousand euro.

By combining all those different numbers,

it gives you a first indication of 50 million euro

that can be gained over time.

This number can be way off or can be very close

to what we can actually achieve,

but once you have this number in place,

you have a tool that you can sit together

with your team to shoot at this specific number.

Maybe some people don't agree, they say,

"No, a thousand euro needs to be two thousand euro

"or five hundred euro"

or they totally don't agree that the five million euro

segment is big enough in France and so on.

You see the relationships between those numbers

and in very early on in the process,

you can challenge them and discuss with your team,

maybe to narrow or to zoom in on that number,

where you would say like,

"the 50 million euro,

"no that's way too high by re-looking at those numbers,

"we end up with a better estimate,

maybe 50 million euro or something."

This is a great starting point to start your business case.

We always encourage people to do

this very early on in the process.

The ballpark figures is a great tool to do so.

Give it a try early on and see where you end up

with your own team.

If you want to download this tool,

you can go to our website

boardofinnovation.com/tools.

This and more examples can be found there

and we're always available for more questions.

Thanks.

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