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On April 24, we conducted a two hour exploration of revenue and what it takes to make a 1 dollar. The session was designed to open thinking to possibilities of making revenue in a start-up, and pitfalls chasing particular models.
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Prepared for directors of
Hong Kong companies
As of April 2014
REVENUE
APPRECIATION:
INTRODUCTION
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HELP MICRO BRANDS
Zelos fully
funded via
Kickstarter
ABOUT
REVENUE
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ANSWER THE FUNDAMENTALS
Pain point
Value proposition
Revenue model
http://futurebooks.com.sg/blog/writing-business-plans-that-speak-to-investors/2308
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OVERVIEW
1. Market size
2. Who should pay?
3. Build revenue into tech
4. Price perception
5. Competitors
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ENTREPRENEURS HATE BOOKKEEPING
I have no
time for it.
I don’t
understand it.
It adds no
value.
I hate it.
It’s for bean
countersWhatever
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CFO IS A POWERFUL + CREATIVE CHARACTER
I love non-
GAAP metrics
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CFO IS A POWERFUL + CREATIVE CHARACTER
How should we
account for revenue?
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ERIC STUDIED MANUFACTURING
ESTIMATING
MARKET SIZE
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3,000 BLOG STORES IN SINGAPORE
Only 10 are addressable
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3D PRINTER FOR DENTISTS
Capital expenditure by a
dentists
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LIMITS ON SCALABILITY
Govt. regulation
Customer behaviour
WHO PAYS?
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WHO WILL PAY FOR IT?
End users / buyers
Sellers
Advertisers or sponsors
Govt subsidies (medical reliefs etc)
The end user doesn’t
always pick up the bill.
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BEHAVIOURAL SEGMENTATION
Traditional segmentation has
historically relied on geography or
demographic traits.
Behavioral segmentation looks to the
customer to see how they use the
product, on what platforms or
through what channels.
Saul Berman, Not for
Free: Revenue Strategies
for a New World
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HYPOTHETICAL F+B SPEND PER ANNUM
USD
Revenue 2,000,000
Annual expenditure
COGS 500,000
Equipment and maintenance 50,000
Salary 500,000
Rent 250,000
Public relations 20,000
Utilities 30,000
You are here
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MORE TRANSACTIONAL THE REVENUE MODEL, THE LESS EXPOSURE
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INTERMEDIARIES
Entire business built on
intermediary called
recruiters
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HYPOTHETICAL RECRUITER SPEND PER ANNUM
USD
Revenue 5,000,000
Annual expenditure
Salary 750,000
Rent 150,000
Recruitment ads 75,000
Utilities 25,000
You are here
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VALUE CHAIN
Translate a menu
Menulance
Embed menu
Menu Modo
Host a menu
Let’s Eat
Hottest part of the value
chain is here.
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UNDERSTAND
Revenue
Line item spend
Trends and behaviour
http://futurebooks.com.sg/blog/writing-business-plans-that-speak-to-investors/2308
BUILD REVENUE
INTO THE
PRODUCT
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LAST MINUTE BUSINESS PLAN
The product
Revenue model
Sales projections
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INTEGRATED BUSINESS PLAN
Revenue, product
and sales integrated
in one story
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POSSIBLE REVENUE MODELS
Advertising
SMS sent to twitter
Pay-per-tweet
PRICE
PERCEPTION +
FREEMIUM
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SHOULD WE MAKE IT FREE?
Free now. Upsell later.
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SHOULD WE MAKE IT FREE?
Nightclubs replaced
alcohol with water
and energy drinks.
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HONDA MSX125
Saul Berman, Not for
Free: Revenue Strategies
for a New World
Price rose in
2014
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WHAT EFFECT DOES PRICE HAVE?
Qty
$
Inelastic
demand
P2
P1
Q2 Q1 Qty
$
P2
P1
Q2 Q1
Elastic
demand
demand demand
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GOOGLE DON’T MAKE FREE PRODUCTS
Intermediary
market of sellers
Mums and
pop shops
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UNDERSTAND
Effects of free
Effects of a discount
When price can rise
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COMPETITORS
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WRONG ASSUMPTIONS
$600 price point
$100 to acquire a customer
Marketing-focus
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MAKE MISTAKES AT THE LOWEST COST.
Use an eye
dropper, not a
bucket
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IDENTIFY REVENUE DRIVERS
Director drawings
Travel allowance
iPad purchase
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DO YOU REALLY NEED TO BUY IT?
Buy items which contribute
directly to revenue
Think twice.
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WHICH CUSTOMER TO SPEND ON?
Customer acquisition
Cost of acquiring
Cost of conversion
from free to paid
Customer retention
Cost of maintaining
Life-time value
Upsell
An existing
customer is 3 times
more profitable
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WHEN DO WE MAKE REVENUE?
New product, new marketFollow on product, existing
market
Rate of revenue
making (cash)
Rate of revenue
making
(accrual)
Time Time
Re
ve
nu
e
Re
ve
nu
e
Revenu
e
lag
Revenu
e
lag
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UNDERSTAND
Revenue drivers
Test at lowest cost
Know the metrics
http://futurebooks.com.sg/blog/writing-business-plans-that-speak-to-investors/2308
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TERMS OF USE
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4. Any request to otherwise reproduce the Contents from
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addressed to: info@futurebooks.com.sg.
Disclaimer of Warranties and Liability
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