One of the things start-ups need to learn early on is the financial health of their business.This can be done by creating a Revenue model. In this session, we dug deep into the Business Model Canvas and looked at the questions an entrepreneur will have to ask herself when creating a revenue model
What are my customers paying for?
Is your product of any value to them? Look at these areas: economic, social, emotional, flexibility, temporal
How much will they pay for it?
This question is very tricky as customers can get unrealistic. How much can they pay for the product?What should they pay for the product,
What form of it will they pay for?
If it is an asset purchase,you can charge for upgrade fees, installing fees, subscription, rent, licence etc
What is the price they will pay?
For customers to access your product, what will it take them? a visit to the shop? internet to enable them order your goods online
When will they pay?
If you sell to customers on credit, it affects your business operations. Will they pay a retailer, who pays you after a month? This too affects your bottom line and should be factored in
Once you have answered all these questions, consider the following too
- Is revenue adequate to justify the business
- Are you confident revenue will grow materially if not dramatically over time?
- Does profitability improve as revenues get bigger?