aia2018 - mohammad zebian - revenue model design
TRANSCRIPT
Where are you at Today
Idea Does It Solve
a Problem ?
What Is My
Solution
(Prototype) ?
How Will I
Deliver
Value?
Revenue Model – What Is It
3 key parts of a revenue model
1. How you make money ?
2. How Much are customers willing to pay ?
3. What is your Revenue Potential and Profitability
(key to securing seed investors)
Revenue Model – Why is it Important
• Indicator of Cash flow stability….critical to
startups and investors.
Volatility is the enemy of investors
• A competitive advantage, even if you have
the exact same product (Sun Edison)
Some Key Points for Startups –The Sales Funnel Trickle Down Effect
Generating revenue is part of a Customer Conversion process
that takes time http://startitup.co/guides/374/aarrr-startup-metrics
Some Key Points for Startups –The Sales Funnel Trickle Down Effect
Conversion rate decreases the further you go in the Funnel.
This is part of CAC….you need to monitor it
Some Key Points for Startups –The Sales Funnel Trickle Down Effect
Lack of Revenue is a symptom of an earlier problem
Some Key Points for Startups –Activation and Retention
At this stage (MVP) you want to focus on Activation and Retention
• Activation tells you if you created something of value that people want
• Retention is King…if people like your product, they will keep coming back for
more and tell others
Some Key Points for Startups –Activation and Retention
Tips for Activation
- Good website content (value proposition clear)
- One Step registration with email or Facebook
- Easy to download and use your app
Tips for Retention
- Loyalty campaigns (ex. Dropbox referrals)
- Push notifications (app is at the top of mind)
- Re-engagement adds (Amazon cookies)
Common Types of Revenue Models
See Monetization Cards in AIA Handbook
• Freemium (Spotify, Dropbox)
• Pay what you want / use
• Advertising (Metro News, Google tools)
• Marketplace (Supply and Demand driven) (AirBnB, Ebay)
• Flat rate (one time fee for a lifetime)
• Subscription (for a fixed period of time)
• Pay per use (Zipcar)
How Much Should Customers Pay?Don’t ask the customer what they are willing to pay. TELL THEM.
Set your price against
– Existing alternatives
– Cost savings your solution will provide
– Market conditions for customers
Example: Diabetic device
Strong Revenue Model
• High LTV (high customer retention, recurring
revenue)
– The more you use Dropbox, the less likely you will switch
• Easily Scalable product / service
• Product and Revenue model provide a
competitive advantage
– More value than a hard drive (but not cheaper)
Weak Revenue Model
• High CAC
• Low LTV (low customer retention, expensive to
get customers, no recurring revenue)
• Not a Scalable product / service (ex. Restaurant)
• Product and Revenue model are similar to
existing solutions and competitors. Competing
solely on price.
What Investors Look for
Investors want a high revenue potential to mitigate the
risk of failure when investing with a startup.
• Experienced Team
• Revenue Potential (Cash flow)
– Large Market size, clear competitive advantage
• Profitability. Good unit price economics
– LTV > CAC
What Investors Look for
• Scalability
– Ability to expand customer base with minimal cost
– Tech vs Non-Tech
• Recurring Revenue preferred (more stable revenues, lower
CAC, higher LTV)
• Customer lock-in features (Ex. Facebook)
• High Frequency of Purchases
Day 6 TaskUse the Revenue Model Decision Tree to define the best revenue model for your startup.
Use Monetization Cardsto study different revenuemodels, and select your write revenue model.