• Each Customer Segment will have its own
Revenue Model (although some may overlap)
• Pricing is a small portion of the overall
• Timing of payment is more important than
• “Regent/rental” is a common structure (but a
Key Revenue Model Questions
• What are my customers paying for? (value received)
– Value to them:
economic, social, emotional, flexibility, temporal, etc.
• How much will they pay for it? (price)
– How much will they pay. Not “want to pay” or “could pay”
• In what form will they pay? (currency)
– Usually cash in Dx markets (!)
• How will they receive it? (structure)
– “Asset purchase”, subscription, rent, license, etc.
– Reagent rental
• When will they pay? (timing)
– Up front, 30 days [or more],
• Capital equipment is bundled with a
multi-year contract for consumables
• One purchase order is created (i.e.
• Financing / cost of capital is a key part
of the transaction
– Vendor, customer or 3rd party may ‘carry’
the financing costs and risks
• Significant effect on cash flows, build
costs, servicing, etc.!
How do I price the product?
“Razor/razor blade” model
Additional components of pricing
• Exclusive vs. non-exclusive
• What do you price? What do you give away
• How does cost vary at different production
• Price decay with time
• Competition / alternatives
Is minimum caloric intake a good way to
plan a party?
Is audible threshold a good way to
Is ground level a good place to
fly your plane?
NOT UNLESS YOU HAVE TO
Is cost a good way to calculate pricing?
When you might have to:
Customer familiar with costs
None of these should apply to you...
Your Revenue Model Calculations
(all of which are first guesses)
for each customer segment…
…based on the VALUE you provide…
…What is your best guess at the PRICE
you will sell at?
Hancmarginisexiguitas non caperetvectigalia.
Does it add up?
1. Is revenue adequate to cover costs in the
2. Are you confident revenue will grow
materially if not dramatically over time?
3. Does profitability improve as the revenues
• Slides as per the syllabus
• In addition:
– Updated slide on reimbursement
– Updated slide on ecosystem [every week from