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The Lean LaunchPad Lecture 6 : Revenue Streams

Steve Blank Jon Feiber Jon Burke http://i245.stanford.edu /. The Lean LaunchPad Lecture 6 : Revenue Streams. value proposition. key activities. customer relationships. key partners. customer segments. cost structure. revenue streams. key resources. channels. 1. images by JAM.

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The Lean LaunchPad Lecture 6 : Revenue Streams

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  1. Steve Blank Jon Feiber Jon Burke http://i245.stanford.edu/ The Lean LaunchPadLecture 6: Revenue Streams

  2. value proposition key activities customer relationships key partners customer segments cost structure revenue streams key resources channels 1 images by JAM

  3. REVENUE STREAMS what are customers really willing to pay for? how? are you generating transactional or recurring revenues?

  4. Revenue Streams • How many will we sell? • Where/Who is the money coming from? • How do we price the product? • Does this add up to a business that’s worth doing?

  5. How Many Will You Sell? • What was the Market size and estimate of market share?, • Translate into the anticipated number of customers (as in 10% of a million-person market=100,000 customers) • How many can your channel sell? • How much will the channel cost? • How many customer activations? • Revenue? Churn/Attrition rate? customers/? • How much will it cost to acquire a customer? • How many units will they buy from each of these efforts?

  6. the strategy the company uses to generate cash from each customer segment Revenue Model =

  7. Where is the money coming from? Revenue Model Choices • Channel • Web • Physical • Direct Sales • Products • Subscription • Add-on services • Upsell/Next Sell • Referrals • Direct Sales • Products • Subscription • Upsell/Next Sell • Ancillary Sales: • Referral revenue • Affiliate revenue • E-mail list rentals • Back-end offers • Bits • Product • Direct Sales • Products • Service • Upsell/Next Sell • Referrals • Leasing • Physical

  8. the tactics you use to set the price in each customer segment Pricing Model =

  9. How do we price the product? Pricing Model Choices

  10. How do we price the product? Pricing Models - Physical Product-based pricing Competitive pricing Volume pricing Value pricing Portfolio pricing The “razor/razor blade” model Subscription Time/Hourly Billing Leasing

  11. How do we price the product? Pricing Models – Web/Mobile/Cloud Product-based pricing Subscriptions Freemium Pay-per-use Virtual goods Advertising sales

  12. Payment Flows Insurance Need to test Mammography is a loss Less mammography New claims Radiologist In progress Testing In progress CUSTOMER Better care Breast cancer specialists lose PCP OB/GYN Patient Mammography Tested More patients Revenue Attract patients Technician Hospital Administration Sales representatives Demand Creation Tested Job loss New costs In progress Need to test Doctor specialty committee ACOG ACS MammOptics Need to test Revenue Improve healthcare Draw the diagram Put in Numbers

  13. Multi-side Markets and Revenue Single-sided markets that care about revenues Web-based Multi-sided markets may care about users first, revenues second

  14. “Revenue First” Companies • Time to doublings for monthly revenues • Key questions: • When will I get to $100k/month in revenues? • When will I get to $1M/month in revenues? • What assumptions about my business am I making when I reach these milestones?

  15. “Users First” Companies If you say your business is advertising based: • How do you get to 10M monthly users? • How do you become one of the top 5 websites visited?

  16. New Market Sales Curve New Market Revenue Forecast

  17. Existing Market Existing Market Revenue Forecast

  18. Resegmented Market Revenue Forecast

  19. Other Issues Distribution Channel affects Revenue Streams Market Type affects Revenue Streams Demand curve affects Revenue Consider Lifetime Value

  20. $60 per unit $90 per unit Start with Key Assumptions • Target market • USA market – 1.5 M patients • Europe – 2 M patients • Package • Reusable wrist watch • Disposable sensors / patch • Access to patients data • Product development • 4 people in the beginning • $2 million • 1.5 years to develop (for BP) • Sales • Start in EU middle of year 3 • Start in USA end of year 4 • Personnel • Average salary $120 K • Load factor 1.5 • Headcount from 4 to 174 in year 8 • Financing • Series A – $3 M • Series B – $10 M Price per package: $150 COGS Operating Expenses Profit

  21. Does it add up? • Is the revenue adequate to cover costs in the short term; • Are you confident the revenue will grow materially if not dramatically over time; and • Does the profitability get better as the revenues get bigger?

  22. What’s your revenue  model?   How will you price your products?    Draw the diagram of payment flows   What are your key financial metrics?         Test pricing 100 web customers 10/15 non web?    How do competitors price? Assemble a rough income statement   Summarized in a 5 Minute PowerPoint Presentation Team Deliverable for Next Week

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