[lean 101] costs & revenues - breaking even or breaking bad???

Breaking Even or… Breaking Bad?

Nikos Palavitsinis, Agro-Know

400. Costs & Revenues

Lean AKademy, Mar-Apr, 2014

401. Report of Interview Results

• We put the LC on the wall again• Practical problems? How were your interviewees?

Document their characteristics• Product Risk– What are you solving?

• Market Risk– Existing Alternatives

• Customer Risk– Is this a viable customer segment?


402. How Interviews Affect our LC

• This is the time to put the new input on the canvas

• Any other insights?– Channels?– Pricing? – Other details we need to put up there?


403. Cost Structure Deconstructed!

• What is your cost structure?

• What does it cost for you to build and launch your product?

• Cost < Expenses


403. Cost Structure Deconstructed!

• Two types of cost• Fixed costs– Building, employees, etc.

• Variable costs– Resources, other activities, channels

• Still a set of hypotheses


404. Identify your Cost Structure

• What is the cost for one person?

• Development costs?

• Time for interviews? Developing your customer…

• Landing page? Time needed to create a collection?


405. Revenue Streams Deconstructed

• How do you make money? From each customer segment…

• Revenue Model = Revenue Streams (strategy) + Pricing (tactics)– You don’t set the prices based on the cost of

making– You don’t set the price less than the competition– Revenue stream is NOT the price…


406. Identify your Revenue Streams

• Revenue Stream – The strategy that the company uses to generate

cash from each customer segment

• May have multiple revenue streams for different customer segments


Questions

• What value are customers willing to pay for? • How do customers pay for products today?• How much do they pay?



• Asset Sale– Sale of ownership right to a physical product

• Usage Fee– Fee is proportional to the usage of service

• Subscription Fee– Fee for continuous access to a service

• Renting– Fee for temporary access to a good or service



• Licensing– Fee for use of some IP (software)

• Intermediation Fee– A fee of bringing two parties together involved in a

transaction• Advertising– Fee paid by brands and companies to get in front

of potential customers



• Pricing Model– The tactics you use to set the price in each

customer segment• Each Revenue Stream may have different

pricing tactics– Fixed pricing– Dynamic pricing– Based on the customer input


Pricing

• Fixed Pricing– Cost + Markup – Value based (price on specific customer segments

or features)– Volume based (Intel)

• Dynamic Pricing– Negotiation– Yield Management (airlines)– Real-time markets (stocks)– Auctions


407. Takeaways & Assignments

• Let’s spend some time to reflect on our work today

• How did our LCs change?

• Do we have a different outlook on our initial hypotheses?


407. Takeaways & Assignments

• Refine your canvas some more… Look at the costs, pricing & revenue streams

• Prepare new interview forms and reach out to new interviewees!

• Conduct new interviews and prepare your input for the next time…


Questions?

[lean 101] costs & revenues - breaking even or breaking bad???

Small Business & Entrepreneurship