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RevenueStreams&Cost Structure
David JWhite
KatelynWonsock
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Revenue Streams
RevenueStreams
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Revenue Streams
Howdoyougeneratecashfromeachcustomersegment?• Whatvalue docustomersputonthebenefitsyouprovide?
• Whatvalue arecustomerswillingtopayfor?
• Whatvalue docustomersinferfromyourpricing?
Revenuestreams=whatPricing=howmuchandwhen
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Revenue Streams
PriceonVALUE– notbasedoncost• (butknowyourcost)
Twodifferenttypes:• Transactionrevenues(one-timepayments)• Recurringrevenues(ongoingpaymentsorcust.support)
Everycustomersegmentneedsarevenuemodel• (freeisok,butknowit)
ThisconceptisnotaboutanIS,BS,orCF.Thoseareoperatingdetailsthatarederivedfromaprovenrevenuemodelandpricing.
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Revenue Streams
Waystogeneraterevenue:
• Saleofphysicalassets(Amazon,automobiles)• Usagefees(paybyminutephones,hotels)• Subscription(gym)• Renting/leasing(Zipcar)• Licensing(mediaindustry,IP)• Brokeragefees(RE,consultants,finance)• Advertising(software,media)
Perhapsacombinationofoneormore?
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Revenue Streams
• Revenuestreamisthestrategyusedtogeneratecashfromcustomers
• Pricingisatactic
• Whatkindofpricingmodelwillyouhave?
• Whichdoyouprefer?
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CostStructure
2014Carr,Riggs&IngramLLC- Allrightsreserved.
CostStructure
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• Whatarethecriticalelementsofthecoststructure?– Fixedcosts– Variablecosts– Resource,activity,partnercosts– Infrastructure,operational,costofsales– Payrollcosts,benefits,bonusstructure,taxes– Whatarethecostsofeachelementofthebusinessmodel?
– Wherearetheeconomiesofscale?– Whataretherisks,theunknowns?
CostStructure
2014Carr,Riggs&IngramLLC- Allrightsreserved.
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• Allstagesincurcosts– creatinganddeliveringvalue,customerrelations,andgeneratingrevenue.
• Whataresomestrategiesfordecreasingfront-endfixedcosts?Whatarethepros&consofeach?
• WhatoptionsdoyouhaveifyoucannotBEsoonenough?
CostStructure
2014Carr,Riggs&IngramLLC- Allrightsreserved.
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• Whatarecustomerswillingtopay?• Howwilltheypay?• Whatkindofrevenueareyougenerating?Transactionalorrecurring?
• Sample,testpotentialcustomers&vendors• Onlineandoff• Solicitfeedback
Testingyourhypothesis
2014Carr,Riggs&IngramLLC- Allrightsreserved.
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• Hypothesis: Here’swhatwethought• Experiments: Here’swhatwedid• Results: Here’swhatwefound• Action: Here’swhatwe’regoingtodonext
Testingyourhypothesis
2014Carr,Riggs&IngramLLC- Allrightsreserved.
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• Createarough3yearincomestatementtoshowyouhavearealbusinesswithyourrevenuemodel(s),channels,costs,etc.
• Whatisyourbreakevenpoint?
Breakevenpoint
2014Carr,Riggs&IngramLLC- Allrightsreserved.
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Breakevenpoint
2014Carr,Riggs&IngramLLC- Allrightsreserved.