Please find the whole article here: https://hackernoon.com/the-path-to-profits-50826d53d947 Turning a product into a company requires distribution and operation resources. As a consequence, I work a lot with talented entrepreneurs to help them understand where they stand on their journey to profitability. The Path to Profits is a simple framework CEOs and Entrepreneurs can use for quickly identifying their companies’ stage of financial maturity and the levers and options they should consider to turn their products into profitable companies. The Path to Profits is by no means a unique way of approaching your numbers and KPIs. Do not hesitate to get in touch should you feel like contributing to this framework or if you have questions about it. 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. You can get in touch with me on LinkedIn here: https://www.linkedin.com/in/matthieulavergne/

1. The Path to Profitability
Why there are a lot of profitable products but few profitable companies

2. The Path to Profitability
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
Price is what you pay for, value is what you get
- Warren Buffet

4. Profits derived from delivering 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 optimizing profits 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 cannot turn 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
Poor distribution – not product – is the number one cause of failure.
- Peter Thiel

8. Profits after selling to 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 order of 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 optimizing profits 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 cannot turn 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 operations can 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 optimizing profits 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 cannot turn 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 in Paris, 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, rue de 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