↑ Return to G90 Founders

G94 Revenue (4)

by
George Morgan
My articles
Follow on:

Page no: G94

Revenue

Validate a scalable revenue model

Date: Apr 21, 2021
Starts at: 06:30 PM (Europe/Zurich)

In this Feedback Session, Founders will share their pitch and revenue model with Mentors for feedback and continued refinement. You will also get tips on how to sustain your startup before receiving financing or revenue, identifying the most lucrative revenue source for your business, testing different revenue sources with your target customers, and more.

 

Sprints

Below are just a few of the 10-15 deliverables you’ll complete through Working Groups and Office Hours:

 

Launch Track Deliverables

  1. Customer Problem – Based on your research, select one customer problem to pursue in the program that has the greatest chance to generate significant revenue.
  2. Revenue Models – Narrow down that problem to three potential revenue models, and thoroughly analyze the positives and negatives of each model.
  3. Professional Pitch Deck – Use our templates to develop a professional three minute long pitch deck, based on the feedback, concepts and flow that have resonated from your Hotseat pitches.

 

Growth Track Deliverables

  1. Expert Interviews – Speak with three financial people who have experience in a similar industry to your customer problem, and get their insights and opinion on the scalability of your revenue model.
  2. Key Performance Indicators – Based on your research thus far, identify the final key metrics that will impact your ability to secure revenue (and funding). Discuss these with your Local Leaders, and finalize a tracking system for these metrics.
  3. Product Development – Refactor your plans to prioritize the release of a solution that will generate initial customer revenue and validate your riskiest assumptions.

 

Revenue: Company Building Work 

Questions Answer

#1 (Expert Interviews)

Speak with experts about your revenue models. Identify three financial people, such as a CEO, CFO or Controller, who has worked or is working at a startup in a similar industry to your Customer Problem. set up a 30-minute discussion about financial models with each of the three financial people. During your discussion, ask them about revenue models that either work or do not work for this type of business, the challenges of each model, the key metrics for each model, the Customer Acquisition Costs and any other details that they can share. Write the name of each financial person, their title, the company they are associated with, and a bulleted synopsis on the lessons learned from the discussion with that person. (3 Hours)
1) SEO Petar Limonov of a SEO Agency
2) Rene, Irniger, SEO Client
3) SEO Yani Nikolov, Deavita.com , SEO Agency
Revenue model: One Setup fee + Monthly fees
His company has a different revenue model which is more stable and with fixed prices. They’re selling articles for a fixed amount and they also provide advertising in their website which is nearly fixed per month again.

About our revenue model:
1) Our “minimum” revenue model allows a drop out each month. This can lead to a high churn rate.
Petar thinks  that it is a risk revenue model, because of

Low fee in the beginning (100$ monthly), which will not cover our expenses (in 200k revenue model)
There is no obligation and the client can stop paying whenever they want

  • We have an investment in the high-authority domain, server, and so on. If the client stops paying after 2 months, we will not cover all investments and expenses.
  • A monthly-based subscription revenue model must be powered by a well-developed system that will keep all clients’ details such as credit cards, invoices, paid period, and so on. This is risky and we haven’t start developing it.
  • He also suggests investigating the option of a contract-based revenue model, minimum period, e.g. 6, 12 or 24 months. (example Idrive)
Benefits of this will be:
  • All our expenses and investments will be covered
  • We will have simple accounting and it will not needed software, because we can offer bank wire payments
  • We will be secured that we “lock” the client for a certain period of time
  • We can start with this revenue model right now -> without a big accounting software (e.g. Stripe)
  • We can be more flexible. For example, we can offer the first 3 months free if we sign a 12-month contract. This way they can see the benefit from our service before they start paying.
Up-sale
In our revenue model currently, we do not have up-sale strategy. Peter suggests that we should introduce at least 3 plans, which will include different features. Usually, the clients always take the middle plan, which means more money for the company since the beginning. Also, this means that we can have a very cheap plan for clients who are not fully convinced of the service we provide.

B2B or Reseller
Having such a service, Yani  thinks that most of our customers can be different SEO agencies.
Currently, 70% of his business is through other partner SEO Agencies.
In our offer, he strongly suggests thinking about such plans or bulk discounts.

This leads to the following Customer types:
  1. SEO Agency that use our SCE (Smart Content Engine)
  2. SEO Client that use our SCE.
  3. SEO Reseller that pretend that the SCE is their product and sell it to their SEO clients.
Costs: SEO Agencies
Both agencies usually have costs of 25%- 30% of revenue. in order acquire a client.
For both costs are Sales Agents.

Additionally, they have 4-8% marketing expenses. advised us to put at least 25% expenses (direct costs with sales) and 5% marketing expenses.

Learning:
 Start: One-Revenue model should start with 6 months minimum term.
We need to think about how we will maintain 10 or 50 customers at the same time like support, billing platform, and so on.
 We must be very flexible in our pricing tables over longer-term

#2 (Steps to Revenue)

Identify all of the steps before money is deposited in your bank account. Provide a numbered list of the steps that must occur before you receive a payment in your bank account from your Archetype Customer with your One Revenue Model. For each step, write the name of the step, the approximate timing for the step to be completed in Minutes, days or weeks, and a couple of sentences that describe what needs to happen for that step to be completed. A description of Steps to Revenue is available here (https://FI.co/guides/revenue_steps). Consider ways to dramatically reduce the number of steps or reduce the amount of time for each step. Discuss the steps that you have identified with your Working Group and write a bulleted list of the feedback received from your peers. (2 Hours)
Option A: Monthly based revenue
Step1) Subscribe for the service and pay installation tax. Give your credit cards in the beginning.
Step2) Get 1 month for free
Step3) After one month, you start paying
Step4) They pay with Stripe
Step5) Money arrives after 2 days
Step6) You charge the credit card every first day of the month
Option B: Contract-based Revenue
Step 1) Sign contract for 6, 12 or 18 months
Step 2) Choose a method of payment: Bank wire, Credit/Debit card or Paypal
Step 3) Generate an invoice
Step 4) Pay the invoice via bank
Step 5) Money arrives the next day

Option C: Contract-Based  + Additional services
Step 1) Sign contract for 6, 12 or 18 months
Step 2) Choose a method of payment: Bank wire, Credit/Debit card or Paypal
Step 3) Generate a report for the used services for the month
Step 4) Generate invoice for monthly subscription and the additional services
Step 5) Pay the invoice via bank
Step 6) Money arrives the next day

#3 (Key Performance Indicators)

Identify the key growth metric for your One Revenue Model. Based on your Expert Interviews and Steps to Revenue, write a bulleted list of the key metrics that are needed with your One Revenue Model for you to secure revenue, referred to as Key Performance Indicators (KPIs). For example, with B2B businesses, a common KPI is the number of sales leads, and, for B2C businesses, a common KPI is the number of users. With each KPI, carefully think if there is another metric that needs to come before it. For example, with sales leads, there may need to be prospecting calls, and, with users, there may need to be marketing campaigns. Write a couple of sentences describing each KPI. With most businesses, executing on one KPI drives the entire business model. Rank order the KPIs by importance, and write a couple of sentences on why you chose the most important KPI. (2 Hours)
KPIs for Prospective Clients:
  1. Conversion rate (number visitors on our sales website and how many become clients)
  2. #Sales Leads: We will be using sales agents that obtain a commission per sale. Therefore we do not consider this as KPI, given that is “internal” to the sales agent.

    KPIs for existing clients:

  3. Number of clients. We assume a linear growth.
  4. how long one client is willing to pay, the churn rate.
it will verify how good is our idea and if clients are satisfied with the service.
Based on this KPI we will also know how good the customer service and general user experience are.
We will have to clearly articulate that changes in Google rating will only happen after 4-6 month

5. What initial fee the client is ready to pay (without having results),  if the client is ready to commit with us for 6, 12, or 24 months.

#4 (Revenue Projections)

Create or update your 18 month Revenue Projections, making sure to target at least USD $1 million in revenue over the coming 18 months. Make a spreadsheet that forecasts monthly revenue for 18 months after you release an initial solution. For each month, use growth in the KPIs to forecast growth in the revenues. Growth in the KPIs can also be used to forecast growth in the expenses. Factor in the feedback from the Expert Interviews and from the online research. A sample Revenue Model Template is available here (http://fndri.com/12wcXAp). Provide a link to the Revenue Projections. (3 Hours)

 KPI Churn Rate:

Link to the 1 Mio Forecast based on KPI = Churn Rate of 20%
–> Recurrent SEO Revenue = 57K in 2022, 131K in FY 2023

We are now modifying the churn rate:
Churn Rate = 30% –>
–>  Recurrent SEO Revenue = 45K in 2022, 94K in FY 2023

Churn Rate of 40%
–>  Recurrent SEO Revenue = 36K in 2023, 73K in FY 2024

KPI: # Clients.
FY 2022: 34
FY 2023: 57
FY 2024: 70
FY 2025: 80
FY 2026: 100

Expenses:
Our spreadsheet/tool provides the possibility to associate expenses to each revenue flow. These are so-called Direct Costs.
Currently nearly all expenses are Direct Costs, like Sales Agents 20% (of recurrent SEO), Marketing 15% (of initial sales).

Feedback:
The main feedback from experts are incorporated.
1) 6 months minimum contract, that lowers the churn rate to 20%.
2) Increase of initial implementation costs, given that we must buy high-quality domains.

#5 (Sales)

Encourage a number of people that resemble your Customer Archetype to buy your solution. For B2B solutions, get one or more customers to buy the product by getting a full sale, an initial down payment or signing an LOI. For B2C solutions, get five or more customers to pay for manual delivery of the solution or, if your solution is not ready or you can not manually deliver the solution, get at least twenty customers to provide contact and demographic information on a Landing Page or site that displays the target pricing. Write the amount of revenue that you have secured, specify the amount of time that it has taken you to collect the revenue, identify the number of customers that you reached out to and the number of customers you acquired. Write a paragraph describing the process, including an outline of the material used, the steps taken and the lessons learned. Provide a bulleted list of any materials that were used with links. (5 Hours)

 Customer: Rene Irniger, ONYX Lamps

We have  now obtained the following agreement.
(1) Rene Irniger, OnyxArt
(2) has the intent to buy our SEO services “EasyBacklinks”
(3) no contingency
(4) Price terms:

EasyBacklinks obtains a percentage of 8.5% of each additional sales realized by OnyxArt.
Standard Price: 300 CHF per lamp  (Profit 150 CHF for OnyxArt)
EasyBacklinks obtains: 25 CHF

We are still in discussion of an initial down payment.

#6 (Validation)

Provide an update on your Validation work. Write the name of the two or more top items that you still needed to secure empirical evidence about, and then provide a couple of sentences on the tests that you have done over the last two weeks, including any empirical and measurable discoveries. Write another sentence about what else may need to be done to gain sufficient confidence in the data collected. Provide a bulleted list of at least three other items that you need to validate, and write a couple of sentences on how you plan to validate these items before the Mentor Idea Review in two weeks. (2 Hour)
Beware that we have already done an extensive validation with customers in the previous assignment.

We also validated with the 2 co-CEOs of an SEO Agency (with 1500 employees).

  1. Do the domain(s) back-linking pass the high domain-authority to the client pages?
    –> YES
  2. Do the smart content engines (sites back-linking to the client pages) should possess high-quality content?
    -> Yes,
  3. Does this content duplication harm the SEO?
    -> No, if the domain-authority is high enough.
  4. Consequence for the smart content engine (s) that point to the customer sites.
    –> Each content engine should possess a high quality domain.
  5.  Do we need a different website for each client? 
    One smart content engine should be focus on one subject logical domain.
    –> Yes, you do not articles about furniture on a finance site.
    Many domains = low risk, more blogs, better ranking
  6. Buy High Quality Domain for a smart content engine or use existing websites?
    -> We should directly buy one.
  7.  Subdomains have different domain authority (e.g. SEO.SNBCHF.COM)
    –> Every subdomain is considered as a new domain.
    Some tools like Moz.com do not offer this functionality.
  8.  One customer corresponds to one smart content engine?
    –> If we use one smart content engine for many customers or only one per customer, is still an open issue.
    We need an access rights concept here.
    All furniture clients, for example, could use the “Furniture” smart content engine.

#7 (Product Development)

Update your Product Development plans based on your customer interviews, validation, sales, revenue projections and other work. Provide a bulleted list of links to any Product Development Plans, project specifications or other documentation that you have, and review these materials in detail. Refactor your Plans to prioritize the release of a solution that will allow you to generate initial customer revenue and to validate any assumptions. Write a few sentences on how you have changed the Plans. Then, write a few more sentences on what you can accomplish with Product Development over the next two weeks before the Mentor Idea Review to demonstrate progress with the product. (2 Hours)

 Link to Product Development Plan.

Presentation for Mentor Idea Review:
1) The first MVP for the smart content engine applied to our first client .
2) First two post feeds and 2-4 video feeds based on the client keywords.
3) The client can have access and he will be able to see what content is loading
4) He will see the backlinking to his site.

Changes based on feedback:
For now we do not changed our plans based the feedback below.
We have not figured out yet changes to the product, but we have changes to the revenue models.

Key status update:
We can go live with the MVP (aka auto-blogger) and show a working product to clients.

Last MVP functionality that is currently in a first testing:
Automate the backlink module.
The client can define client-specific text and images and choose the backlink frequency.
The backlink module will create the required text based on the original blog article.
Effort required 2-3 weeks.

#8 (Name Evaluation)

Evaluate the current name for your business. Write the current name for your business and provide a couple of sentences on why this is strong name. Write at least two other names that you considered for the business, and provide a couple of sentences on the strengths of these names. Send the list of at least three names to your Working Group and solicit feedback. Provide a bulleted list of any feedback below the business name that includes the name of the Working Group member. (1 Hour)
Current Website:
We are currently using the domain
SNBCHF.COM (in the #2 Customer Segment Authors)
with a Domain Authority of 46 (according to Moz.com).
Options:
1) Should we use SEO.SNBCHF.COM ?
SEO.SNBCHF is only valuable for a start.
2) EasyBacklinks
Do we need existing domain authority (eg. SNCHF.com) so that people find “the best SEO site”?
Domain authority on the company web site’s domain is not needed, because this is what our company does, namely to increase domain authority.  We drastically improves the authority of the company website by creating backlinks.

3) AutoBacklinks
The notion “Auto” is rather a technical one, from the customer perspective it should be easy.

4a) EasySEO
4b) AutoSEO
SEO or Backlinks: Discussion from Blasters discussion.
SEO has the argument that it is easier to remember for investors (but only investors).
But we are creating a tool for backlinks, but we are not a full-fledged SEO company.
Moreover, there so many SEO companies.

Length of Website URL:
Easybacklinks is a bit long
fi.co, for example,  is short (but nobody understands what it is reading the URL).
What about EBL.COM ?

Website owner evaluation
The domains ebl.com and easybacklinks.com are taken.

Final Suggestions:
  1. ebl.io abbreviation, .io is the startups domain extension
  2. easy-backlinks.com = It explains the idea easily from the domain + the keyword is in the domain
This amounts to Short URL versus Meaningful URL:
Our customers are IT professionals. They store bookmarks on the browser or type the keyword “backlink”.
So we do should not overrate argument of having a short URL. Moreover there some (but limited) SEO effect of having the keyword inside the URL.

#9 (Company Profile)

Update each field on the ‘Account’ section of the Founder Institute site. Fill in the company information, including the five sentence company description. If you do not have a company name yet, use a temporary name for now. Ensure that each field has complete information with proper grammar and punctuation. (30 Minutes)
Company description
Easy-Backlinks helps small companies to radically reduce their Search Engine Optimisation (SEO) budget.

We have created a smart content engine that helps companies to achieve higher Google ranking and sell more with a smaller budget.

We do automatic searches of high quality content and store it in a database. Based on this content the engine creates backlinks to the customer pages and increases the Google ranking.

#10 (Weekly Update)

Provide an update on your weekly business progress. Copy the previous Weekly Update and mark all items that have been completed or Asks that have been fulfilled as “(DONE).” Mark anything that has not been completed or fulfilled as “(UNDERWAY),” and provide a one sentence update on their status. Add a few more bulleted items to be completed across Team, Product, Traction and Program for the coming week. (30 Minutes)
Weekly update:
  • Product: EasyBacklinks Prototype, plan for next week.

    1. DONE Define keywords that are specific the client’s site, i.e. ONYX Lamps. Complete the list
    2. DONE Define keywords that are specific for the competitors site, i.e. floor lamps, Table lamps, stone lamps. Complete the list.
    3. DONE Find Blogs and videos that are good as input, e.g. a blogs about interior design.
    4. Outstanding Define the filtering keywords for these blogs and Youtube videos.
    5. In progress – Create a first Satellite Site with 2 sample feeds
  • Sales agent:
    1. DONE – A key item is to get a sales agent that ideally has a list of SEO prospects already at hand. This would help to solve item (5), the sales for next week’s assignment.
      Advert is DONE
  • DONE – Rest of Team continues to work on the Customer segment #2:
    Authors
    but slowing down the effort, so that they can focus more on EasyBacklinks.

    Authors:

    1. DONE – Fill author data incl their site, twitter, linked, home page, sales page, about 800 authors.
    2. In progress –Continue with a few client interviews for the customers that show the biggest interactions in Twitter.
    3. Prepare surveys, if time remains.  Outstanding 
  • Traction:
    In progress –     The team task on filling author data (1 above)  is a typical traction task. Once we have filled the data, we increasing the client/author base with whom we are interacting with.
  • Program:
    I have gone through the tasks for a first overview. no questions yet

#11 (Office Hours)

Go to https://FI.co/ohours and schedule Office Hours with at least one Local Leader or Mentor for this week or next. Book a 15, 20 or 30 minute virtual meeting with at least one Local Leader to discuss your Weekly Update, your Asks, your Pitch Deck, and to review any questions that you have. Please ensure that your timezone is set correctly at the top of the page. (30 Minutes)
I have scheduled 3 sessions this week. More to come in the next week.

#12 (Second Mailing)

Expand The List to include at least 10 more people, including the experts that you interviewed. Send a second mailing to The List with an outline of your final idea, your chosen Revenue Source, some or all of the content from your Weekly Update, your Asks and a request for feedback. List three key pieces of feedback or help that you receive. (1 Hour)
The following are the feedback/questions obtained from the mailing list.

  1. Spinning is the Artificial Intelligence process that creates unique content.
    Does spinning require manual intervention?
    -> No, we use the API of the spinning providers.
    Beware that our USP is that we use both automatic content sourcing and spinning.
    Competitors do NOT exist that do both.
  2.  How many new articles can be published per month?
    -> As many as we want. Just start with a small amount and increase over time.
    Some proof-reading after spinning is needed. This is usually  done by the customer.
  3.   Two languages in one smart content engine—> Better on different domains.
    –> Definitely different domains. Otherwise an issue for Google crawl bot.
  4.  Do we need a different website for each client? 
    One smart content engine should be focus on one subject logical domain.
  5. Why is the initial fee higher then the recurrent fee? This differs from Standard Offsite SEO.
    —> The initial fee is higher because we have to set up the feeds from high-quality sites and define the keywords.
    After that the engine runs nearly automatically – apart from article choice and proof-reading.

#13 (Pitch Deck)

Develop a three minute long Pitch Deck. Use a professional presentation template, and outline a series of slides to present your business in three Minutes based on the concepts and flow that have resonated with Mentors from your Hotseat pitch. Make sure to include key points from the one minute Hotseat pitch, and learnings from this week. For reference, here is a basic sample deck (http://fndri.com/1515yLt). Provide a link to the DRAFT deck, which will be used for the Mentor Idea Review. (2 Hours)
Updated Pitch Deck

#14 (Hotseat Pitch)

Update your one minute Hotseat pitch, taking all of the learning from this week. Practice the updated pitch at least five times. Video yourself giving your best Hotseat pitch, and upload the video online as unlisted and accessible. Paste the link to the unlisted video in the assignment here and also paste the link in the field on your homepage under Weekly Pitch. (30 Minutes)

#15 (Hobbies and Free Time)

Take time to do something fun. Keeping strong social ties and having fun in your life are important to maintain a “work-life balance” as an entrepreneur. Select one person who is important in your life, and schedule at least one hour to do an activity together that you both find entertaining. Also, organize a regular monthly game or event with friends, and add it to your personal calendar. Write down a few bullet points on what you did, and specific steps you will take to keep social ties and fun in your life as you build your business. (1 Hour)
Every 2nd day, I watch a film together with my wife.
I do fitness together with a close friend.
Due to Covid19, further events are currently quite limited.
I maintain a network mostly using social media; this is also based on my twitter network.

Director Feedback

Question 7 is missing all the links. Please review and update accordingly.
Question 13. Pitch Deck – Visual representation needs to be reworked
Question 14. Your 60″ pitch need to be reworked – please visit slack and find the 60’ pitch i have placed there as an example. Follow the same principles when you recontract your own. Book office hours with me.

Athanasios

Links

Reading

Required

Resources

Submitted

Partners

LivePlan Business Plan Software takes you through the process to create investor-ready business plans. Founder Institute members get HALF OFF LivePlan. Log in to see the link. Sign up for the next FI exclusive webinar to get an in-depth demo o… More Details 

 

 

See more for GP9 Founders
About George Morgan
My articles
Follow on: