- It is important for early stage startups to monitor their monthly burn rate as running out of cash is a major cause of failure. Burn rate is calculated as the cash balance at the beginning of the period minus the end balance divided by the number of months. - Understanding unit economics, including revenues, customer acquisition costs, operational costs, and lifetime value is essential for evaluating the viability and profitability of a business model. Realistic forecasts are needed around these metrics. - There are many factors to consider when determining the right price for a product or service, including costs, value provided, competitors' prices, and requirements of sales channels among others. Pricing strategies also require consideration around discounts, promotions, and maxim

2. • The goal of your business is to make money
• In the early stages, money does not flow in buckets
• You need money to survive
• Your revenue (or savings) at some point needs to
exceed your costs
• You want to maximize your ROI as much as possible
• You need to understand your market, your pricing
options and your potential revenues

3. • You have a job (or jobs)
• Your SO has a job (or jobs)
• You have savings or disposable assets (which are
being depleted)
• You borrow or are gifted from family or friends
• You borrow from the bank
• You have some form of grant
• You live at home and really nice parents

4. • Burn rate is the rate at which cash is decreasing.
Especially in early stage startups, it’s important to know
and monitor burn rate as companies fail when they are
running out of cash and don’t have enough time left to
raise funds or reduce expenses.
• Monthly cash burn = cash balance at the beginning of
the year minus cash balance end of the year / 12

5. • Product: Anything relating to the product as well as what the customer
perceives as the product
• Price: Cost to the user and determining a pricing strategy
• Promotion: Tools and channels used to reach customers and prospects
(advertising, sales promotions, public relations, etc.)
• Place: The channel of physical distribution (the product’s actual movement
through a means of distribution) and sales (how the product is sold, whether
through website, wholesalers, retailers, direct mail, etc.)

6. • Target Marketing involves breaking a market into groups (segments)
whose needs and desires most closely match your product or service
offerings and then focusing marketing and sales efforts on one or more of
these segment.
• Geographic – Country, region, postal code, city, compound
• Demographic – Age, gender, religion, race
• Psychographic/Behavioral – class, personality, lifestyle

7. Total available
market (TAM)
Serviceable
Available Market
(SAM)
Serviceable
Obtainable (SOM)
Penetrated Market
(PM)
Target Market
Your customers
TAM in your geographic reach
Potential scale of the market 228 Million Coffee Drinkers
47 Million Brew at Home
16 Million are aged 25-35
8 Million are drink our coffee

8. Consumer Markets Business Markets
Many customers, geographically dispersed Fewer customers, concentrated in
locations
Smaller amounts of money Larger budgets
Simple decision making Complex decision making
Influenced heavily by advertising More focus on personal selling
Subjective buying criteria More objective formal criteria

9. • Size of Market: This is the total size of the market. Large markets are attractive.
• Profitability: How profitable the segments is in short and long term.
• Growth Rate: The growth rate might be important in making segments attractive. Perhaps this is
because a firm requires high-growth areas to ensure future profitability.
• Bargaining Power of Customers: Segments might be attractive because customers do not have
power to bargain over such things as price and service.
• Competitive Landscape: How crowded is the market and how competitive is the competition.
• Customer Accessibility: How easy is it to reach the customer.

10. Stage Key considerations Metric
Awareness Are people aware of the problem
you solve? Has anyone heard of
you?
Search results, Web traffic, social
media mentions
Consideration When they have the pain do they
think of you? Do they understand
your solution?
Requests for information, number
of demons
Trial Do people sign up? Do they begin
to use your solution?
Sign ups, pilots
Adoption Do people use full workflows? Are
they getting value?
Engagement metrics, % people
using full workflow, economics
Recommendation Do your current users bring in
new users?
Viral co-efficient K, Net promoter
score

11. • Sell expertise (services)
• Sell a physical product
• Sell a virtual product
• Sell a custom product
• Sell labour (yours or someone else’s)

12. • Ad-Based Revenue Model - Ad-based revenue models entail creating ads for a specific
website, service, app, or other product, and placing them on strategic, high-traffic channels.
• Affiliate Revenue Model - Promoting links to relevant products and collecting commission
on the sales of those products
• Transactional Revenue Model - This method is one of the most direct ways of generating
revenue, as it entails a company providing a service or product and customers paying them
for it.
• Subscription Revenue Model - The subscription revenue model entails offering your
customers a product or service that customers can pay for over a longer period of time,
usually month to month, or even year to year.
• Web Sales - this is an offshoot of the transactional revenue model, in which a customer
pays directly for a product or service, except that customers must first come to your
company via a web search or outbound marketing, and conduct transactions solely over
the internet.

13. • Direct Sales - There are two types of direct sales: inside sales, in which someone calls in
to place an order or sales agents calling prospects; and outside sales, which is a face to
face sales transaction.
• Channel Sales (or Indirect Sales) - The channel sales model consists of agents or
resellers selling your product for you and either you or the reseller delivering the product.
• Retail Sales - Retail sales entails setting up a traditional department store or retail store in
which you offer physical goods to your customers.
• Product is Free, But Services Aren’t - This model is unique compared to others, in that
you have to give your product away for free, yet require customers to pay for installation,
customization, training or other additional services.
• Freemium Model - The freemium model is one in which a company’s basic services are
free, yet users must pay for additional premium features, extensions, functions, etc.

14. Fixed
Pricing
Cost
Plus
Markup
Time and
Material
Higher risk Lower risk

17. Money for goods

18. Metric Type Examples
Number of users Seats, active users, environments,
connections
Level of Usage Data volume, storage, sockets opened,
duration
Transaction Volume Conversions, Click Throush, Sales
Business value Increase in profit, energy saved, change in
conversion rates, savings
Innovation in pricing can be valuable and a differentiator

19. DifferentiationPrice
Image
Support Quality
Design
Convenience

20. • Skim – Price as high as you can to increase profit and
reinvest in innovation
• Market Following – Price relative to a market leader or
standard price
• Penetration – Price as low as you can to win market
share

21. Penetration Market Skimming

22. Right
Price
What does it
cost to not have
your product?
What are your
targets spending
on products like
this?
What are my
competitors
charging?
What are the
requirements of
my sales
channel?
What is the
payback period
required for
your product
What value do
you bring?

23. • Don’t limit payment types
• Reward loyalty
• Make it easy to buy
• Offer discounts
– Quantity Discount: When two or more of the same product are purchased at the same time
– Tie-In Discount (“Bundling”): When two or more different products are purchased at the same time
– Seasonal Discount: When products are bought within a specific time-frame
– Conditional Discount: When the products purchased are used or reconditioned
– Stripped Discount: When the products purchased are “stripped” of one or more features
• Request and/or reward referrals
• Don’t complicate pricing
• Make the value proposition clear
• Answer questions quickly
• Time limit offers / early bird offers

24. • Sometimes your cost is not the only consideration to
a customer in buying your product.
– Training
– Cancelation fees
– Servers
– Installation
– Project Management fees
– Integration with existing platforms

25. • Key test groups
– Pre-test
– Friendlies
– Customer Targets
– Larger Audiences
– You can do A/B testing

26. Segment Opportunity Total Targets Goal Targets Goal Revenues
Top Performers $10M 30,000 5,000 $1M
Multi-Unit $10M 30,000 1,000 $200,000
Nationals $30M 100,000 1,000 $200,000

27. • The exercise of predicting sales, revenues, costs,
growth, the break even point and other variables
over a particular period of time in order to determine
the feasibility of your business or particular revenue
model or initiative.

28. • Unit economics is defined as the “direct revenues and
costs associated with a particular business model, and
are specifically expressed on a per unit basis”.

29. • Revenue - the amount of money that a company actually receives during a specific
period, including discounts and deductions for returned merchandise.
• Customer Acquisition Cost - the cost associated in convincing a customer to buy a
product/service.
• Operational Costs - the expenses which are related to the operation of a business,
or to the operation of a device, component, piece of equipment or facility.
• Growth Costs – Costs associated with business and product development
• Lifetime value - is the projected revenue that a customer will generate during
their lifetime.
Revenue – Costs = Profit

30. Fixed Costs
Fixed costs are costs that must be paid whether or not
any units are produced.
Variable Costs
Unit variable costs are costs that vary directly with the
number of products produced.
• Business premises lease (or mortgage)
• Startup loan payments
• Taxes
• Insurance
• Vehicle leases
• Equipment (machinery, tools, computers, etc.)
• Payroll (if employees are on salary)
• Some utilities
• Accounting fees
• Hosting Fees
• Wages for commission-based employees
• Utilities costs that increase with activity
• Raw materials
• Shipping costs
• Advertising (can be fixed or variable)
• Equipment repair
• Sales costs (such as credit card processing fees, etc.)

31. • Be realistic on revenue expectations
Potential
Maximum
Revenue
Customer Constraints
Competitive Constraints
Company Constraints
Product Adoption Constraints
Realistic
Revenue
Forecast

33. Month 24: $125 per cart
Month 1: $100 per cart

36. Profit: $9,704
-1.5 Million over 2 years

37. • Do not understand cost to serve
• Do not understand how customers get value
• Think all customers get value the same way
• Default to cost plus pricing
• Default to market following pricing
• Ignoring real competitive alternatives
• Fail to set reference prices (no pricing architecture)
• No, erratic or mixed pricing strategy
• Not realistic in adoption expectations