Exercise on Analysing a Business Earning Model
In this exercise, you will be analysing the financial foundation of a fictional company Triple Tech.
Case
Beginning of 2018. Triple Tech, technical consultants in research, development, and time to market, is a young startup. The company was launched in 2015 with their first consultancy projects for their client base of industrial companies implementing IT applications to their products. Triple Tech claims to have reached break-even exploitation in 2017 and is ready for the next step of growth. In the following table, you can find the financial figures of Triple Tech.
Triple Tech, technical consultants in research, development, and time to market.
| Balance sheet begin of the year (Euro thousands) | 2017 | 2018 |
|---|---|---|
| Non-current Intangible assets (R&D investments) | 350 | 450 |
| Non-current Property, Plant, Equipment | 410 | 460 |
| Current assets – work in progress | 400 | 440 |
| Current assets – accounts receivable | 430 | 470 |
| Cash and cash equivalents | 270 | 91 |
| Total assets | 1.860 | 2.011 |
| Equity | 780 | 811 |
| Non-current liabilities – bank debts | 780 | 830 |
| Current liabilities accounts payable | 300 | 370 |
| Total equity and liabilities | 1.860 | 2.011 |
| Income statement over the year (Euro thousands) | 2017 | —- |
|---|---|---|
| Revenues | 860 | |
| Cost of projects | -520 | |
| Depreciation | -50 | |
| Selling and administrative expenses | -90 | |
| Other operating expenses | -110 | |
| Operating income (EBIT) | 90 | |
| Interest expenses | -56 | |
| Income before tax | 34 | |
| Income taxes | -3 | |
| Net profit | 31 |
| Cash flow statement over the year (Euro thousands) | 2017 | —- |
|---|---|---|
| Net profit | 31 | |
| Depreciation | 50 | |
| Changes in current assets | -80 | |
| Changes in current liabilities | 70 | |
| Cash flow from operating activities | 71 | |
| Cash flow from investing activities | -300 | |
| Cash flow from financing activities | 50 | |
| Change in cash and cash equivalents | -179 |
In the development of a new business venture, we distinguish between an economic healthy Business Model and the process of Building Business step by step towards a sustainable business.
Questions:
a) Why is it important to distinguish between these two aspects?
b) Analyze Triple Tech on both aspects. Mention what in your opinion are the three most critical points about the business model of Triple Tech and the three most critical points about building business at Triple Tech.
Technology Entrepreneurship: How to Start a New Venture
Technology Entrepreneurship: How to Start a New Venture
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