To be successful, a business needs to have a plan for short-term revenue and long-term profitability. Early-stage founders might be tempted to come up with half a dozen ways the company could make money. Don't be tempted: five untested solutions don't make a real solution.
Having said that, there can sometimes be multiple business models that could lead to profitability. The Business Model Canvas approach, where each aspect of the business is condensed into one slide, offers a holistic view of every aspect of your business. However, for a pitch deck, it's worth narrowing it down to two things: customer acquisition and lifetime value.
For acquisition, focus on where you find your customers, whether those acquisition channels are scalable, and how much it costs to acquire a new customer, typically called customer acquisition cost, or CAC.
On the lifetime value front, examine how much each customer is worth, from the time they show up on your product until they stop using it. Every dollar they spend along the way is the lifetime value of an individual customer. From there, you can divide your customers into different segments: one category of customers could be the people who come to your platform and leave immediately; Another category may be customers who stay for weeks, months, or years.
For the sake of simplicity, it's usually enough to take the total money earned from customers and divide it by the number of customers you have; that's the average value of those customers so far. The challenge is to model how long they will stay. By definition, you will only know the information of a client true, lifetime value, after they're gone; So here, you'll need to build a model and make some assumptions about how much time your customers will spend as customers and how much money they'll spend along the way.
The only mission of a startup is to find a repeatable business model
I'm quite a fan of Steve Blank's definition of a startup: "A startup is a temporary organization used to search for a repeatable and scalable business model.«. Or, put another way, your business is destined to become a machine that can turn the $100 you put on top into $150 that falls from the bottom. Take the $150, throw it back on top of the machine, and you have a viable, repeatable, fast-growing business model.
A business model, in this case, is the full stack of how your company operates: how you deploy your resources (money and people) to create products and attract paying customers, and how you retain those customers.
It is also possible to change business models after the business is up and running. Adobe, for example, used to sell Adobe Photoshop for around $600 but had problems with piracy. By changing its business model to include a subscription to its suite of tools, Adobe was able to decrease hacking while creating more predictable cash flow.
The important thing is to narrow down the focus of your business model and how you are going to focus their attention during the sales cycle of your product.
Focus young Padawan
To create a well-oiled startup, you need to find a business model that works for you right now. It is difficult to test more than one business model at a time. Showing an investor that they have five business models does not show that they are any closer to finding one that works. Instead, it shows that you are not sure. That's not a bad thing: Early-stage startups are vehicles for experimentation, and no one expects you to hit a home run the first time you swing the bat.
But you must have a good operating plan that shows what you are going to do in the short term.
Fully develop the business model that you believe is most likely to succeed. Explain the problem and show how your product will solve it, while having solid control of how you will attract customers, how much it will cost you, and how much you will charge them to maximize your customer lifetime value.
Remember that you can always include an appendix slide showing different models that you have been thinking of. Find out what your business would look like as a SaaS B2B company, as a subscription company, or as a retail channel company, if you must, but surely if you have a business model that you believe in, you won't ever need to. that slide.
Execute hard, miss, then pivot and fix
Sometimes it will feel like you are sprinting into a brick wall. That is the nature of startups. You'll never go fast enough, you'll never have enough resources, and you'll always want answers faster. The trick to running an early-stage business is that you'll need a lot of chutzpah and faith in your plan. Create a good operating plan and execute it to the fullest.
If your plan turns out to be wrong and you're sure your business won't work the way you originally envisioned it, come up with a new plan, or "pivot" in startup parlance, and try again.
But only with one business model at a time.
