To have success, a company needs to have a plan for short-term income 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, I think 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 with you 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 find 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 to the top of the machine, and you have a viable, repeatable, fast-growing business model.
