BUS-217: Week 5
Engineer an economic model
The numbers need to work.
We created a Launch Path Canvas, and now the next step is to look at the economics of our model. Our definition of a business model was “The rationale by which an organization creates, delivers, and captures value”, so how do we translate that into a set of numbers that represent the model?
Ultimately, any business has to be a sustainable engine that acquires customers for a cost of X and is able to monetize them for a value of Y. And so there is one equation to rule them all: Customer Acquisition Cost (CAC) needs to be less than the Lifetime Value of a customer (LTV). Memorize that one equation, because it’s the one that will ultimately determine whether your startup flies or dies.
“The point of a set of financials is to tell a story with numbers – a story about opportunity, resource requirements, market forces, growth, milestone achievements, and profits.”.
-Guy Kawasaki
Lecture:
My 12-minute overview lecture:
My 15-minute review of my spreadsheet for Fitaco:
Main Reading:
Other reading:
Assignment:
- What is one unit for your particular venture? What are the unit economics? Then build a full economic model for the first year of operation. Create yours from scratch or, if it’s helpful you can start with the Fitaco one.
Founder Interview:
- Zach Morgan talks about scaling his startup, Solfium. Listen now.