DESIGN

TEST
A startup is temporary organization in search of a scalable,
repeatable business model
Steve Blank

Mission/Vision

Strategy/Execution

Product/Service

Business Plan
or
Go To Market Plan
 Business Design

1. What if we had to offer our core product(s) for free? How would we earn revenues?

2. How could we generate recurring revenues?

3. How could we build a platform business?

4. How could we get others to create value for us for free?

5. Which strategic partners could we work with to leverage our business model?

6. How can we achieve most scalability in our business model?

7. How could we dramatically increase switching costs?

8. For which segments - other than current users - could we develop a value proposition?
The financial plan may never be accurate.
But the accuracy of the plan isn’t the point -
instead, the plan is a tool to communicate,
explore scenarios and successfully manage
the company to the next big milestone.
Tom Tunguz
COS - Cost of Sale the costs you incur in each COGS - Cost of Good Sold the costs you incur
time your product/service is sold (e.g. agents, in to create each product (e.g. manufacturing)
indirect sales channel) or purchased (e.g. Apple or provide each service (e.g. people/staff)
store)
COS and COGS are related to what are we
selling and must be taken into account to
choose/evaluate operational models. High
COGS = you’ll want low/no stock and will
need to be careful with your financial cycle.
High COS = look out for your margins, not just
for revenue growth.
Gross Margin
It’s calculated by taking the revenue and If a startup invests $500k in
subtracting all the COGS marketing and sales this quarter and
generates $1M in incremental
Sales efficiency revenue, net of the cost to provide the
incremental revenue returned by sales and service, for the next 12 months, the
marketing investment sales efficiency would be 2. Customer
Payback time revenue reimburses sales and
The inverse of the sales efficiency, equals the marketing costs in ½ year or about 6
time you need to pay back the marketing months.
investments. High payback time = riskier
marketing investments.
Revenues Total sales generated by the product or service
- COS The costs you incur in each time your product/service is sold
= Net revenues Total sales generated by the product, less the cost of sale
- COGS The costs you incur in to create each product or provide each service
= Gross Margin It’s calculated by taking the net revenue and subtracting all the COGS
- Fixed Costs Salary, overhead, investments
EBITDA is the revenue minus all the costs incurred, before technicalities: (Earnings Before)
Interests, Taxes, Debt and Amortisation. It dictates the minimum amount a startup
needs to raise to become “profitable”.

Focus on the ratio between fixed costs, variable costs (COS, COGS) and
revenue growth.
High fixed costs = need to grow fast (or have a lot of money in the bank)!
ARPU Revenue generated by a single
(average) user Average Revenue Per User and Average
ARPPU Revenue generated by a single Revenue Per Paying User are key to
(average) paying user measure top line in unit economics.

You can calculate backward if you have actual data:

Total Monthly Revenue/Number of Registered Users or Monthly Active Users

Or forward if you are making estimates

Price of product/service x Expected lifetime/number of purchases

Churn rate ( o Lifetime) the annual/monthly/weekly percentage rate at which
customers stop subscribing to a service

A 3% monthly churn rate implies most customers will only hang around for 2
years. The greater the churn, the more challenging revenue growth becomes
over time.
CAC Customer Acquisition Cost is the money you spend to get a registered user
and/or a paying user.

Useful tools:

Google Keyword Planner https://adwords.google.com/KeywordPlanner

Facebook Ads Manager https://www.facebook.com/business/

Customer Lifetime Value (CLV)
The total value generated by a customer in their lifetime. Monthly/Yearly ARPU
(or ARPPU) x Lifetime in Months/Years

This is the critical unit economic of your business.

CLV tells you how/if your business is sustainable and how much money you can
afford to spend.
CLV > CAC = all good (but pay attention to payback period)
CLV < CAC = not sustainable!
 Readings

Tom Tunguz
http://tomtunguz.com/ten-financial-metrics/

Christoph Janz
http://christophjanz.blogspot.com/2014/03/cohort-analysis-practical-q-guest-post.html

Paul Graham
http://www.paulgraham.com/growth.html
Che cos’è il Service Blueprint? È uno strumento utilizzato per mappare e
comprende meglio sotto forma di analisi le fasi operative di un servizio
viste dal punto di vista dell’utente tramite l’utilizzo di tre livelli operativi
cioè il livello operativo di sistema, di interavione, e dell’utente.
Componenti del Service Blueprint:
1) Azioni del consumatore
2) Interazioni del personale dirette
3) Interazioni del personale indirette
4) Processo di supporto

1) Azioni del consumatore nel Service Blueprint = include le fasi, le scelte

e le attività del processo di acquisto e di consumo.
2) Interazioni del personale dirette nel Service Blueprint = le fasi e le
attività che l’impiegato in contatto diretto rende visibili al consumatore
3) Interazioni del personale indirette nel Service Blueprint = Le fasi e le
attività che sono dietro le quinte per supportare le azioni dirette.
4) Processo di supporto nel Service Blueprint = riguarda il servizio
interno, le fasi e le interazioni di supporto e di contatto.

Ogni componente del Service Blueprint è diviso da una linea specifica.

1) Linea di interazione
2) Linea della visibilità
3) Linea dell’interazione interna
Linea di interazione = separa le interazioni dirette del consumatore con
l’organizzazione dell’impresa.
Linea della visibilità = separa le attività e i servizi visibili al consumatore da
quelli non visibili
Linea dell’interazione interna = speara il contatto degli impiegati dalle
attività e dai servizi di supporto
Il blueprint service può essere utile al miglioramento dei servizi di
mercato, alle risorse umane, alle operazioni del management e ai sistemi
automatizzati.
Service blueprint
Design and fill out a service blueprint for the
solution you have identified.
Make sure to include:

• the user journey from a functional

perspective (use the output of the value
proposition session)

• the emotional aspect (think back to the

personas; use some narrative)

• the required infrastructure from a

tech/operations standpoint

• sketches of your solution…