4. Common Mistakes
⢠A Revenue Stream is the price I charge customers
⢠I set the price of the product based on how much it
costs me to make it
⢠My price has to be less than my competitors price
5. The Two Key Questions
⢠Whatâs my revenue Streams?
⢠Within the revenue streamsâ how do I
price the product?
6. Revenue Stream =
the strategy the company uses to
generate cash from each customer
segment
7. Pricing Model =
the tactics you use to set the price in
each customer segment
16. âDirectâ revenue models
⢠Sales: Product, app, or service sales
⢠Subscriptions: SAAS, games, monthly subscription
⢠Freemium: use the product for free: upsell/conversion
⢠Pay-per-use: revenue on a âper useâ basis
⢠Virtual goods: selling virtual goods
⢠Advertising sales: unique and/or large audience
17. âAncillaryâ revenue models
⢠Referral revenue: pay for referring traffic/customers to other
web or mobile sites or products.
⢠Affiliate revenue: finderâs fees/commissions from other sites
for directing customers to make purchases at the affiliated site
⢠E-mail list rentals: rent your customer email lists to
advertiser partners
⢠Back-end offers: add-on sales items from other companies as
part of their registration or purchase confirmation processes, or
âsellâ their existing traffic to a company that strives to monetize it
and share the resulting revenu3
27. Two Types of Pricing
ď§ Cost + markup
Fixed ď§ Value priced (by customer segment
Pricing or features)
ď§ Volume priced
ď§ Negotiation
Dynamic ď§ Yield Management
Pricing
ď§ Real-time market
ď§ Auctions
28. Common Startup Mistake
ď§ Cost + markup
Lets Price on Cost ď§ Typically not a strategic way to price
ď§ Driven by internal economics and not
customer insight
29. Common Startup Mistake
ď§ Cost + markup
Lets Price on Cost ď§ Typically not a strategic way to price
ď§ Driven by internal economics and not
customer insight
ď§ Based on buyerâs perception of
value (e.g. time saved, new
Price on Value efficiency created, etc.)
ď§ Customers donât necessarily feel
that they want to pay this way
30. Market-Type Affects Pricing
⢠Pure competition
Nature of
Existing Market
⢠Oligopoly
⢠Monopoly
ď§ What is their product?
How they will
react? ď§ What are their costs and prices?
ď§ âWhat pricing will make them feel
the worst?â
33. âUsers Firstâ Companies
If you say your business is advertising based:
⢠How do you get to 10M monthly users?
⢠How do you become one of the top 5 websites
visited?
⢠How much do the âpayersâ actually pay?
34. âRevenue Firstâ Companies
⢠Time to doublings for monthly revenues
⢠Key questions:
⢠When will I get to $100k/month in
revenues?
⢠When will I get to $1M/month in revenues?
⢠What assumptions about my business am I
making when I reach these milestones?
40. Draw The Diagram
Put in numbers
Tennant
send monthly
water bill
water bill
plus $2/month
$2/month
Property Owners
install meter
$9/month
(2yrs)
activities
$200 one time
Leasing company
payments
41. Key Revenue Model Questions
⢠What are my customers paying for?
⢠What capacity do my customers have to
pay?
⢠How will you package your product ?
⢠How will you price the offerings?
42. How Many Will You Sell?
⢠Whatâs the Market Size & estimate of Market Share?
⢠How many can your channel sell?
⢠How much will the channel cost?
⢠How many customer activations?
⢠Revenue? Churn/Attrition rate? customers/?
⢠How much will it cost to acquire a customer?
⢠How many units will they buy from each of these efforts?
Top down: 10% of a million-person market=100,000 customers
Bottom up: 1,000 customers/month 1st year => 3,000/month 3rd year
43. Thought experiment
⢠Time to doublings for monthly revenues
⢠Key questions:
â When will I get to $100k/month in
revenues?
â When will I get to $1M/month in revenues?
â What assumptions about my business am I
making when I reach these milestones?
44. Reading For Next Week
⢠Startup Owners Manual
â pages 176-179 partners 257-270 and 429-459
46. Academia Payment Flow
activity
payment
Component
Phi Optics
vendors
QPI info & price
Buys QPI
device funds grant/contract
request for equipment
University
Grant Agencies
Researcher Business
Industry Contracts
Services
applies for grants/contracts
47. Bio-Pharma Payment Flow
activity
payment
Component
Phi Optics
vendors
QPI specs
+ price Includes equipment in the
budget
Buys QPI
device
Purchasing CTO
Researcher
Dept. VP for R&D
Justifies need for equipment
48. OEM Payment Flow
activity
payment
Equipment
Phi Optics
suppliers
QPI specs + price
+ SOW
Allocates funds in the
Funds SOW budget
Pays royalties/sub-
licensing/other recurring
fees
Product Dev
Accounting CTO
Engineers + VP for R&D
Dept.
Business Dev ($) +
Legal Dept
(royalties)
Justifies QPI integration in OEM system
Suggests co-development deal
50. Product
Money
OEM Water
Data
only
Large farm
Small farm
USDA/EPA
51. Product
Money
OEM Nutrient
Data
Large farm
Us
Small farm
USDA/EPA
Product sales
52. Product
Money
OEM Nutrient
Data
Large farm
Us
Small farm
USDA/EPA
Licensing/sales
53. Product
Money
OEM Nutrient
Data
Large farm
Us
Small farm
USDA/EPA
Independent of
licensing decision
54. Using $1000 per sensor (2x cost) puts us ~$350 more expensive than current commercial
nitrate sensors. Weâre including pH, moisture, and conductivity, though.
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent
25% cost coverage
Install sensors
400 acres, 4 soil
Us Small farm
types: 8 sensors
$1K/sensor less
incentive = $4140
$3860 for 400 acre
nutrient management
USDA/EPA
55. Using $1000 per sensor (2x cost) puts us ~$350 more expensive than current commercial
nitrate sensors. Weâre including pH, moisture, and conductivity, though.
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent
25% cost coverage
Install sensors
400 acres, 4 soil
Us Small farm
types: 8 sensors
$1K/sensor less
incentive = $4140
Average $10.40 in N-
$3860 for 400 acre
fertilizer lost to groundwater
nutrient management
per acre: Repaid in 1 year
USDA/EPA
57. Revenue model: Hypothesis
Hereâs what we hypothesizedâŚ
Biomass supplier Biomass 15 c/lb
Biomass Range 5-20c/lb
Monomer
manufacturer Monomer ?
Detergent alcohols 80c/lb
Distributor
Surfactant Formulation ?
formulator Formulated Surfactant 90c/lb
Surfactant Surfactant 100 c/lb
Decision user Formulated Detergent 100c/lb
Makers
Consumer facing Detergent 200 c/lb
company 10% Surfactant in Detergent
Consumer Market Pull Product
(Sustainability agenda)
58. Revenue Model: Experiment 1
Hereâs what we didâŚ
Production Economics Experts
Economic analysis expert
Director
Director
Techno-commercial analysis expert
Life Cycle Assessment Expert Economic analysis expert Business Manager
74. Understand Economics of Plant + Sensors Industrial Plants
Understand Economics of Technology Supplier Plant #1
Plant #2
Plant #3
Technology Supplier
Who does this?
75. 75
Diaphragm Membrane
$240/MT Cl2
ďź Operational conditions
ďź Capital cost per incident
ďź Downtime per incident
ďź # of cells protected Cost of damages + downtime per incident per year
ďź Time between incidents
ďź Number of cells, US and worldwide
Value per unit per year
Diaphragm Membrane Membrane Header
$2,500 $270 $10,600
76. Soft product launch projected for Q1-Q2 2012
General launch projected for Q4 2012
Diaphragm Membrane Membrane Header
$2,500 $270 $10,600
Year Type % Revenue [/year]
1 Innovators (US) 2.5 $271,500
Operating costs for 1st year projected to be $350,000
2 Early Adopters 16 $15,040,000
3 Early Majority 50 $47,000,000
4 Late Majority 84 $78,960,000
Full Penetration 100 $94,000,000
76
82. Economics of TSP Operation
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent 25% cost coverage
Install sensors, provide service
400 acres, 4 soil
Us
Pay for 2-3 year contract service monthly types: 8 sensors
Small farm
$3860 for 400 acre Average $10.40 in N-
nutrient management fertilizer lost to
groundwater per acre
$1K/sensor less
incentive = $4140 to USDA/EPA
recover in contract
83. Economics of TSP Operation
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent 25% cost coverage
Install sensors, provide service
400 acres, 4 soil
Us
Pay for 2-3 year contract service monthly types: 8 sensors
Small farm
Onion Case Study (44K acres):
$3860 for 400 acre Cost: DAP - $700/ton + $25/a
nutrient management Rate: 280lb/a for 400a farm
$1K/sensor less = $39K
incentive = $4140 to USDA/EPA
recover in contract 30% Improvement: $13K saved
Charge: $6K/season
= $660K/yr contract revenue
85. Revenue Model
= money = relationship
= information = AAT
Patient
Large Pharma Private Payor
Employer
Government Payor
Wholesalers
Hospital/Clinic
Government
Physicians
Taxpayer
Pulmonary Function Lab INFLUENCER
87. â˘
Revenue Model & Payment Flows
Customer:
LED company
LighTip⢠Engineering contract ($150-300/hour)
Light source
Advanced
Quantity purchase of
Illumination
components for prototype &
Engineering Reflector
mass production .
Desired
target
Key Partner: Our
Optical Manufacturer deliverable
Prototype & High Volume
Production (0.25%-8%
Customerâs final product
commission)
5/23/2012 87
91. Revenue Model
Health
Healthcare Patient Data
Information
Providers Exchanges
Tailored Messaging
Portal $$$
for + Patient Outcomes
Patient Data
Patient Analytics
$$$
Resources/To Health
ols Patient Profile Insights
Patient
Hinweis der Redaktion
----- Meeting Notes (3/6/12 10:38) -----what the dentist makes for a perio procedure
Progression: larger and larger sensor networks deployed