Your startup idea is unique - but the business model isn't unique. What can you learn from established fast growth startup companies? The models and key metrics they use to monetize their ideas. learn more about your revenue models and how they compare to other peer & competitor companies at www.lumeric.com

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DKParker, LLC
2015
Models & Methods
Dave Parker
@DaveParkerSEA
www.dkparker.com
Dave@dkparker.com
“Big E Entrepreneurship”

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DKParker, LLC
2015
Agenda
¤ About Dave
¤ Marketing Methods
¤ Sales Models
¤ Pricing Methods
¤ Business Models
¤ Financial Models
¤ Q&A – Your models

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DKParker, LLC
2015
About Dave
¤ CEO Code Fellows
¤ 5X Entrepreneur
¤ SVP Programs at UP Global (Startup Weekend + Startup
America)
¤ EIR at Mitsui Venture Capital
¤ Board member for three mid-market, handful of startups
and advisory board for over 50+ startup companies
¤ Husband, Dad

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DKParker, LLC
2015
Two Methods + Three Models
¤ Marketing Methods – are mechanics to be tested
¤ Pricing Methods – how to price your product
¤ Sales Models – how you SELL your product.
¤ Business Models – are the way to monetize, including key
metrics
¤ B2B
¤ B2C
¤ Financial Models – include revenue and expenses. Used
for both forecast and actual

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DKParker, LLC
2015
Why?
¤ Doing a financial model requires Data & #’s for:
¤ Marketing Methods
¤ Pricing Methods
¤ Sales Model
¤ Business Model

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DKParker, LLC
2015
Example

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DKParker, LLC
2015
Marketing Methods

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DKParker, LLC
2015
How many of
you are
planning Virality
as a driver of
your model?

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DKParker, LLC
2015
5 reasons you won’t go viral
1. Viral & Network effect is a B2C marketing method
calculated as “K Factor” k = invites sent * conversion
2. No inherent virality in your offering – nothing to share
with other people, e.g. Facebook or WhatsApp
3. No collaboration virality – extending your offering
4. Your target market is too small (TAM/SAM/LAM)
5. Budget and Creative - No “me-too” approach will work

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DKParker, LLC
2015
What you can do
¤ Clear product positioning = word of mouth. Can your
message be repeated to their boss?
¤ Make your product more valuable over time <REALLY?>
¤ MVP vs. KAP “Kick Ass Product”
¤ Free trial is different from Freemium
¤ Corporate users will expense a service below a specific price
point
¤ What the conversion % to paid is the question you will have
to answer

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DKParker, LLC
2015
SAM
TAM
SOM
LAM
LAM – Launch
Addressable Market.
Who can buy your
product at MVP?
Market Sizing

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DKParker, LLC
2015
Marketing Channels and Metrics
What are your core assumptions for marketing?
¤ Track all Marketing by channel and $$ spend
¤ Paid, SEO, etc.
¤ Cost to create leads (traffic)
¤ Cost (effort) and % convert to prospects
¤ Cost (effort) and % convert to customers

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DKParker, LLC
2015
Customers (10)
SEO
Inbound
Outbound
Marketing
Channels
Leads
1,000
Prospects
100

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DKParker, LLC
2015
Pricing Methods

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DKParker, LLC
2015
You can sell
anything for
nothing

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DKParker, LLC
2015
Pricing
¤ What do you need to charge to cover:
¤ Cost of build
¤ Cost of Sale
¤ Profit Expectation = Cash flow
¤ Value based pricing – don’t start too low
¤ One time or recurring?
¤ Bundled pricing (Services+)
¤ “Mystery of Product Pricing”

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DKParker, LLC
2015
Sales Models

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DKParker, LLC
2015
Someone has
to sell your
product – let’s
start with you

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DKParker, LLC
2015
Sales Models
¤ Web Direct – Advertising and conversion based sales, sales
support?, requires customers to search and find
¤ Direct – internal sales people (Inside or Outside), # of deals/
Month, salary + commissions
¤ Distribution/Channel Sales – Indirect or external, <# of deals/
Month, no Salary, just commission <Mindshare. Fulfill
demand, don’t create demand
¤ White Label Sales/Licensing – infrastructure or license sales,
long sales cycle, few but targeted customers
¤ Retail – Product on shelves - N/A

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DKParker, LLC
2015
Known
Market
Unknown
Market
Low Price
Point
High Price
Point
Known Search
Words
Unknown
Search
words
Web Direct ✔ ✔ ✔
Direct ✔ ✔ ✔ ✔ ✔
Indirect ✔ ✔ ✔
Licensing ✔ ✔
Retail

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DKParker, LLC
2015
Sales Model Assumptions
The following apply regardless of models
¤ Cost of Customer Acquisition (CAC)
¤ Lifetime value of Customer (LTV)
¤ Typically 36 month calculation
¤ Time to close sale
¤ How does this change with product/market maturity?
¤ Churn/Retention

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DKParker, LLC
2015
Business Models

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DKParker, LLC
2015
Who is your customer?
Who Pays?
¤ Business to Business (B2B)
¤ Business to Consumer (B2C)
¤ Business to Government (B2G)
¤ At launch you get one, at scale you can have a number

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DKParker, LLC
2015
9 B2B Business Models

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DKParker, LLC
2015
9 B2B Models
¤ B2B Commerce - Example Grainger
¤ Grainger is a wholesale supply company with a $15B market
cap. This ordering site shifted the expense of ordering from
their counter to the customer.
¤ Subscription - Example Salesforce.com - detailed post
¤ There are so many great examples now of B2B subscriptions; I
wanted to highlight one of the frontrunners in Salesforce.
One of the things they did that was masterful was recruited
sales people directly (cheap for 5 users or less) who would
then expense it back to their company.

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DKParker, LLC
2015
9 B2B Models
¤ Search – Example Google
¤ Yahoo was first in the PPC business. Search is a free
consumer service paid for by advertisers – targets action or
intention.
¤ Advertising – Example Facebook
¤ Monetizing eyeballs. Need to start with 1M uniques to be
fundable. Cost per Thousand (CPM) on Banners can target
demographic vs. intention.

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DKParker, LLC
2015
9 B2B Models
¤ Productize a Service - Example MOZ - detailed post
¤ Services business (Consulting) usually generates 35%+ Gross
Margin. Given that pull of profit $, very few companies make
the shift from services company to product company.
¤ Marketplace - Example Alibaba
¤ Nearly everyone has used eBay or similar. Alibaba's IPO and
global presence is what people know it for in 2015. But this
marketplace was founded in 1999.

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DKParker, LLC
2015
9 B2B Models
¤ Transaction Fees - Example Square
¤ Square launched with a replacement for credit cards like
PayPal and take a percentage of every transaction as their
payment. They've since expanded into Point of Sales (POS)
services.
¤ Lead Generation - Example Mint
¤ Consumers are the product to whom Lead Generation
companies are selling. They are a business that sells other
businesses (consumer) leads. They are paid for the lead, not
a transaction. Sometimes this is a great customer experience
like Mint, but with others, like Insurance, it's a bad customer
experience.

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DKParker, LLC
2015
9 B2B Models
¤ Combination - Example Uber
¤ Uber is a business that created a marketplace that
innovated around transaction fees (the driver doesn't control
the price like an eBay seller).

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DKParker, LLC
2015
Other Models – ONLY at Scale
¤ Nonprofit - Example Startup Weekend
¤ Big Data Sales – Data Analytics
¤ Multisided Marketplace – Etsy, Zarly
¤ Panels – ability to interview panel of customers or pay for
Access. Examples: PatientsLikeMe, Toluna
¤ B2B2C – please don’t hurt yourself…

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DKParker, LLC
2015
Financial Models

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DKParker, LLC
2015
To the Spreadsheets!
¤ These details manifest in assumptions
¤ Time based
¤ Launch
¤ Ramp
¤ Scale
¤ Market & Brand Development
¤ Pricing
¤ Overtime

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DKParker, LLC
2015
Just say “no” to $100M!
¤ Avoid the Top 10 Fails Fundraising
¤ Bottom Up vs. Top Down Model
¤ Find a proxy for your business model “Like this for that”

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DKParker, LLC
2015
Q&A – Your Metrics & Models

35. Copyright
DKParker, LLC
2015
dave@dkparker.com
http://dkparker.com/
businessmodels/
@DaveParkerSEA