Uploaded byMatthieu Lavergne
The Path to Profits
The document discusses the path to profitability, highlighting the importance of creating value through pricing and managing variable costs to derive profits from products. It emphasizes that poor distribution is a major cause of failure and suggests optimizing sales channels and reviewing target customers to improve profits after distribution. Additionally, it outlines potential strategies for businesses struggling to profit, such as reviewing their value proposition or seeking acquisitions.
More Related Content
The Path to Profits
- 1. The Path toProfitability Why there are a lot of profitable products but few profitable companies
- 2. The Path toProfitability 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 2 VALUE PROPOSITION PROFITS FROM PRODUCT PROFITS AFTER DISTRIBUTION PROFITS IDEA PRODUCT BUSINESS LINE COMPANY Value Creation the Path
- 3. PROFITS FROM PRODUCT Priceis what you pay for, value is what you get - Warren Buffet
- 4. Profits derived fromdelivering value proposition 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 4 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT PROFITS AFTER DISTRIBUTION PROFITS + PRICE* x repeat rate or lifetime - VARIABLE COSTS* Human capital (maintenance, account management…) Infrastructures (storage, hosting, computing…) Costs of Goods sold External Services included in product (API,…) Shipping and logistics costs = PROFITS FROM PRODUCT** *On a per unit basis i.e. for one unit sold ** equivalent to Lifetime Value (LTV)
- 5. Making or optimizingprofits from product 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 5 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT PROFITS AFTER DISTRIBUTION PROFITS LEVERS CHALLENGE PRICING WORK ON VARIABLE COSTS Keep and focus on critical features, drop the other ones Automatize or simplify certain tasks Negotiate better terms with suppliers ANTICIPATE TRESHOLDS Drops in some variables costs Volume discounts
- 6. If you cannotturn profits from product 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 6 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT PROFITS AFTER DISTRIBUTION PROFITS POTENTIAL PLAN B GET ACQUIRED (unlikely at this stage) GET “ACQ-HIRED” PIVOT STOP
- 7. PROFITS AFTER DISTRIBUTION Poordistribution – not product – is the number one cause of failure. - Peter Thiel
- 8. Profits after sellingto target customer 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 8 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT Customer Acquisition Costs PROFITS AFTER DISTRIBUTION PROFITS + PROFITS FROM PRODUCT - CUSTOMER ACQUISITION COSTS* Sales and Marketing expenses per new customer = PROFITS AFTER DISTRIBUTION * Abbreviated as CAC or COCA
- 9. Determining sales complexity 2017,L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 9 > 20,000€ HIGH HIGH HIGH Between 500€ & 20,000€ MEDIUM MEDIUM HIGH < 500€ LOW LOW HIGH CONSUMERS PROSUMERS SMEs CORPORATE TARGET CUSTOMERS PRICEPOINT
- 10. Deducing CAC orderof magnitude from sales complexity 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 10 > 20,000€ > 25K€ Between 500€ & 20,000€ 1K€ - 8K€ > 25K€ < 500€ 1€ - 200€ CONSUMERS PROSUMERS SMEs CORPORATE TARGET CUSTOMERS PRICEPOINT
- 11. Turning and optimizingprofits after distribution 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 11 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT Customer Acquisition Costs PROFITS AFTER DISTRIBUTION PROFITS LEVERS IDENTIFY NEW SALES & MKT CHANNELS OPTIMIZE EXISTING SALES & MKT CHANNELS STRUCTURE YOUR SALES TEAM DECREASE SALES COMPLEXITY REVIEW YOUR PRICING
- 12. If you cannotturn profits after distribution 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 12 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT Customer Acquisition Costs PROFITS AFTER DISTRIBUTION PROFITS POTENTIAL PLAN B REVIEW TARGET CUSTOMER REVIEW VALUE PROPOSITION GET ACQUIRED (by a company selling to same target customers) GET ACQ-HIRED
- 13. PROFITS All business operationscan be reduced to three words: people, product, profits - Lee Iacocca
- 14. Profits from operations 2017,L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 14 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT Customer Acquisition Costs PROFITS AFTER DISTRIBUTION Investments & Overheads PROFITS + MARGIN AFTER DISTRIBUTION x UNIT SOLD* - OVERHEADS & AMORTIZATIONS* Compensation for management team and all staff that are not directly involved in production, marketing and sales Offices and office management expenses External services not involved in production, marketing and sales Amortization of investment (investment divided by its lifetime) = PROFITS FROM OPERATION** *At the company level, not on a per unit basis ** equivalent to Earnings Before Interests and Taxes (EBIT)
- 15. Turning and optimizingprofits from operations 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 15 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT Customer Acquisition Costs PROFITS AFTER DISTRIBUTION Investments & Overheads PROFITS LEVERS INCREASE SALES VOLUME INCREASE CONTRIBUTION PER CUSTOMER CHALLENGE YOUR PRICING (AGAIN) KILL COSTS
- 16. If you cannotturn profits from operations 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 16 VALUE PROPOSITION Pricing & Variable costs PROFITS FROM PRODUCT Customer Acquisition Costs PROFITS AFTER DISTRIBUTION Investments & Overheads PROFITS POTENTIAL PLAN B OPTIMIZE PROFITS FROM PRODUCT AND PROFITS AFTER DISTRIBUTION AGAIN REVIEW VALUE PROPOSITION CHALLENGE YOUR ASSUMPTIONS GET ACQUIRED
- 17. > Located inParis, San Francisco and Shanghai, L’Atelier BNP Paribas is an influence and innovation company. For 40 years, we have been empowering corporate innovation. About L’Atelier BNP Paribas 2017, L’Atelier © | No distribution or reproduction without authorization | www.atelier.net 17 PROSPECTIVE & CONTENT BOOST PROGRAMS We operate several startup acceleration programs internationally CONSULTING & SERVICE DESIGN
- 18. atelier.bnpparibaslatelier@ BNP Paribas 16, ruede Hanovre 75002 Paris Matthieu is an Entrepreneur in Residence at L'Atelier BNP Paribas where he acts as an advisor for the startups that are going through our accelerators. Prior to joining L'Atelier BNP Paribas, he has been the cofounder & CEO of two tech companies where he took on responsibilities in marketing, sales and fundraising. Matthieu holds a degree of HEC Paris and Texas A&M University. Get in touch: https://www.linkedin.com/in/matthieulavergne/ About the author