This document discusses key aspects of a business's cost structure and revenue streams. It introduces the importance of understanding costs for a sustainable business model. The document then covers: 1) Questions to evaluate key costs derived from the business model, including important expenses from key resources, activities, and how activities drive costs. 2) Types of costs like fixed, variable, and how costs are influenced by business value propositions. 3) Revenue streams can come from transactions, recurring payments, and different pricing strategies. 4) Financial statements are important for shareholders and investors to understand business progress and viability.

2. Session Frame
Revenue
Stream
Financial
Statements
Cost
Structure

3. Introduction
• 90% of new businesses fail in the first 3 years because they
fail to understand their costs or what it will take to create
the goods and services they have promised in their value
propositions.
• Describes the most important costs incurred while
operating under a particular business model. Creating and
delivering value, maintaining Customer Relationships, and
generating revenue all incur costs.

4. Key Questions
• What are the fundamental costs derived from my business
model?
• Which Key Resources represent a significant expense to the
business?
• Which Key Activities represent a significant expense to the
business?
• How do your Key activities drive costs?
• Are the above mentioned activities matched to the Value
Propositions for your business?

5. Cost Structure

6. Cost Structure
• When an entrepreneur has effectively figured out their key
resources, key activities and key partnerships the
aforementioned costs become easier to calculate.
• Must evaluate the cost of creating and delivering the value
proposition, creating revenue streams and focus on long-
term customer relationships.

7. Types
Cost Driven Value Driven
-Reduce Cost
- Cheap price
- Reduce internal cost
- Efficiency operation
-Focus on value
- Focus on creation
- Create customer experience

8. Characteristics
Fixed Cost Variable Cost
-Exist regardless the volume
produced
- Manufacture industries generate
high fixed cost
- Change by time
-Depend on the volume
- Sensitive to changes in demand &
supply
- Represented by utilities & raw
materials

9. Characteristics

10. Revenue Stream

11. Revenue Stream
• For what value is each Customer Segment truly willing to
pay? Successfully answering that question allows the firm
to generate one or more Revenue Streams from each
Customer Segment.
• Each Revenue Stream may have different pricing
mechanisms

12. • Transaction revenues:
Resulting from one-time customer payments.
• Recurring revenues:
resulting from ongoing payments to either deliver a Value
Proposition to customers or provide post-purchase
customer support.
Types

13. Pricing Strategy
• Cost-based pricing: Set your price as a multiple of cost, or
cost plus a determined amount.
• Value-based pricing: Base your price on what your product
and service is worth to the buyer.
• Market-based pricing: Let the market determine the price.

14. Revenue Generation
Asset sale
Ownership rights are sold of a
physical product
Usage fee
Use of a particular service is
sold, the amount paid
depending on the usage.
Subscription fees
continuous or repeated
access to a service is sold.
Lending/Renting/Leasing
granting someone the
exclusive right to a particular
asset for a fixed period in
return for a fee
Licensing
the content owners retain
copyright while selling
licenses to third parties
Brokerage fees
derives from an
intermediation services
performed on behalf of two or
more parties
Advertising
Fees for advertising a particular product, service or brand form the basis of this Revenue
Stream.

15. Financial Statement
• If you have shareholders, they need to know how you are
doing and financial statements are the cleanest way to
show your progress.
• If you are looking for investors, they will want to look at
your financial statements to assess the viability of investing
in your company.

16. Assumptions

17. Example

18. Break-Even point
"At what level of sales will my company make a profit?"