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DKParker, LLC
2017
Flat6 Labs Bahrain Bootcamp – Day 2
Dave Parker
@DaveParkerSEA
www.dkparker.com/blog
Dave@dkparker.com
@DaveParkerSEA
Copyright
DKParker, LLC
2017
Day 2 Agenda
¤ Value Propositions
¤ Customer Development
¤ Product Market Fit
¤ MVPs/Roadmap
¤ Pricing
¤ How Startups Make Money & Metrics that Matter
¤ Marketing Sales
¤ Business Development Revenue Models
¤ Financial Model Templates
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DKParker, LLC
2017
Value Proposition
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DKParker, LLC
2017
Positioning
¤ Positioning is holding a place in your customer’s mind –
not as everything, what’s memorable?
¤ Who is the initial customer
¤ Think about limiting service and customer first – before
you expand
¤ You’re not precluded from selling other services or products
¤ What claim or promise will you make?
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DKParker, LLC
2017
Don’t Bury the Lead
¤ Think of this like journalism
¤ What’s the headline?
¤ What’s the Lead?
¤ What’s the Story?
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DKParker, LLC
2017
Exercise
¤ Write out:
¤ What makes you different?
¤ Why should people buy from you?
¤ Write your websites tagline and opening paragraph
¤ What claim/promise will you make
¤ Write your DRAFT Unique Selling Proposition
¤ Compare this to your Pitch
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DKParker, LLC
2017
Customer Development
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DKParker, LLC
2017
Converging Definitions
¤ Design Thinking
¤ Stanford “D-School” IDEO U Crash Course
¤ Lean Startup
¤ Steve Blank
¤ Eric Reis
¤ Agile Development
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DKParker, LLC
2017
Customer Development
¤ Parallel process with Product Development
¤ “Get out of the Building”
¤ Develop for a few not Many
¤ Prioritize features based on Needs not Wants
¤ Validate with Revenue/Commitment
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DKParker, LLC
2017
What is Customer Development?
¤ Four Steps of an Epiphany – Steve Blank
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DKParker, LLC
2017
Customer Development Goals
¤ Acute focus on problem – not product
¤ Find out if customers care?
¤ What do they want?
¤ Determines the difference your product at launch and at
scale
¤ Feature priorities & Product Roadmap
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DKParker, LLC
2017
Customer Dev Mechanics
¤ Google Forms
¤ Structured questions
¤ Progression
¤ Easy to Hard
¤ What do you really want to know?
¤ Will they pay for it? How much
¤ Why will it fail
¤ Neutral, not Guided Questions
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DKParker, LLC
2017
Customer Dev Mechanics, Cont
¤ Build a list of interested parties
¤ Mail Chimp List setup
¤ Ask for permission to email
¤ Monthly updates –
¤ Format: “What we did, what we’re going to do and
where we can use your help”
¤ Regular frequency – be predictable
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DKParker, LLC
2017
What Not To Do
¤ You are not the customer
¤ Don’t tolerate a small sample set – this could delay your
success by Years
¤ Avoid “Selection Bias”
¤ “Isn’t our product amazing”
¤ No rhetorical questions
¤ No blind surveys
¤ Can’t outsource
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DKParker, LLC
2017
How Many Customer Interviews
¤ B2B – 25+
¤ Profile
¤ Job Title
¤ Type of Company
¤ B2C – 50+
¤ Demographic
¤ ¯_(ツ)_/¯ = bad
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DKParker, LLC
2017
Fundraising Note
You have opinions
You have Data
You get money!
Investors have opinions
They have money
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2017
Hypothesis vs Fact
¤ If you are convinced you’re right you won’t be open to
radical feedback that could change the trajectory of
your business & life!
¤ Always testing what you think you know
¤ Permission to give negative feedback
¤ If this idea was to fail, why would it fail?
¤ Why is this idea stupid?
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DKParker, LLC
2017
Dave’s Madlibs Pitch
Hi, I’m <your name here>, and my company <your Company
name here> the problem I’m solving is <insert problem here>. Our
product <insert product info here> is designed for our target
customer of <insert target customer here>. We make money by
<insert method here> and our team is the right team because
<insert why you’re awesome here>. I need help with <insert help
needed here>.
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DKParker, LLC
2017
Product Market Fit – PMF
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2017
Product Market Fit
Two Epoch’s of every startup
¤ Pre - Product Market Fit
¤ The only thing that matters is getting there
¤ Post – Product Market Fit
¤ A whole new set of questions – Scale, Culture and People
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2017
Pre – PMF
¤ Some Revenue
¤ Some Customers
¤ Some Marketing
¤ A lot Hypothesis
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2017
Post – PMF
¤ Predictable & Scalable Revenue
¤ Customer profiles
¤ Cohort analysis
¤ Churn
¤ Scalable marketing
¤ Hypothesis + Data
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2017
What is “Traction?”
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DKParker, LLC
2017
Predictable/Forecastable Revenue
¤ De-risking your <time> investment
¤ Predictable revenue moves you from valuations based
on trailing 12 to future 12
¤ Target customer
¤ Sales Cycle
¤ Tools trail Strategy and Tactics
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2017
Customer Acquisition Hypothesis
¤ Cost of Customer Acquisition (CAC)
¤ Lifetime value of Customer (LTV)
¤ 36 month calculation in a mature business, 12 months for you
¤ Time to close sale
¤ How does this change with product/market maturity?
¤ Churn/Retention
¤ Average Revenue/measure (User, Account, etc)
¤ Word of mouth vs. Virality
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2017
Product
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2017
Product Vision
¤ Product vision is important
¤ Long term features
¤ Startup with PROBLEM not product – pivot product/
features around the problem
¤ It won’t be what you ship first
¤ What the world looks like before your product
¤ What the world looks like after your product
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DKParker, LLC
2017
Minimum Viable Product (MVP)
¤ Narrow and list features
¤ PowerPoint/Keynote first as your demo
¤ What screens do you need to show (e.g. do you need to
really show registration – answer no)
¤ Have them rank the features
¤ Prioritize the build based on the feedback
¤ More Customer Development Interviews!
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DKParker, LLC
2017
Product Roadmap
¤ What Features, When
¤ Quarterly targets based on
¤ Budget
¤ Available developers
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2017
Cost to Build
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DKParker, LLC
2017
Estimating Costs
¤ Write specification
¤ Required for launch
¤ Design & Flow
¤ Post project on Fiverr.com
¤ PPT/Keynote first with design
¤ Test design and flow
¤ Revise specification
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2017
MVP Mechanics
¤ MVP Series
¤ Blog 1 – Launching a product
¤ Blog 2 – Writing a spec
¤ Blog 3 – picking a vendor
¤ Blog 4 – Contracts, Monitoring Progress
¤ Cost to market and sell – Next Month!
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2017
Company Roadmap
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2017
Company Roadmap
¤ Quarterly Targets
¤ Product
¤ Milestones
¤ People
¤ Hires
¤ # and who
¤ Customers
¤ Onboarded
¤ Revenue
¤ Cash out date
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2017
Roadmap Cont.
¤ Roadmap is NOT dependent on fundraising
¤ If you raise capital, you move things forward in the roadmap
¤ E.G. items from Q4 move to Q2 next year
¤ Where will you be in 18 and 36 months
¤ Does it map to your financial model
¤ Maps to use of proceeds
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2017
Quarterly Roadmap – 18 Months
Q1
People
Product
Revenue
Month to
Cash out
Q2
People
Product
Revenue
Month to
Cash out
Q3
People
Product
Revenue
Month to
Cash out
Q4
People
Product
Revenue
Month to
Cash out
Q1
People
Product
Revenue
Month to
Cash out
Q2
People
Product
Revenue
Month to
Cash out
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DKParker, LLC
2017
Highlight Key Milestones
¤ This is a bit of an eye chart, so highlight key milestones
¤ Product ship dates
¤ First revenue
¤ Key hires
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DKParker, LLC
2017
Dave’s Madlibs Pitch
Hi, I’m <your name here>, and my company <your Company
name here> the problem I’m solving is <insert problem here>. Our
product <insert product info here> is designed for our target
customer of <insert target customer here>. We make money by
<insert method here> and our team is the right team because
<insert why you’re awesome here>. I need help with <insert help
needed here>.
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DKParker, LLC
2017
BREAK
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2017
Metrics that Matter
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DKParker, LLC
2017
What to track – best practices
¤ Marketing Metrics – “Marketing Motion”
¤ Ad Spend
¤ Traffic
¤ Marketing Qualified Leads (MQLs)
¤ Sales Metrics “Sales Motion”
¤ Outbound/Inbound
¤ MQL to SQL Conversion
¤ Business Development – Partnerships
¤ What’s in it for them?
¤ Pricing
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2017
Monthly Updates
¤ Using MailChimp Free Account
¤ Investors – Tagged
¤ Customers
¤ 30 day intervals
¤ What we thought
¤ What we learned
¤ What we’re doing about it
¤ Where we need help
¤ Regularly
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DKParker, LLC
2017
How Startups Make Money
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DKParker, LLC
2017
Do you know?
¤ Cost to Build Known Unknown
¤ Cost to Sell Known Unknown
¤ Price Known Unknown
¤ Profit Known Unknown
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DKParker, LLC
2017
Business Model: Should You Build
It?
¤ Creating Value
¤ You’ve identified a problem
¤ Can you build a solution?
¤ Delivering Value
¤ Ship it!
¤ Capturing Value for what you created
¤ Cost to build – last month (and next month)
¤ Cost to Sell
¤ Make a Profit
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DKParker, LLC
2017
How not to make money?
¤ Small transaction values are bad
¤ Small percentages are bad
¤ Not being able to capture value is bad
¤ Lumpy sales cycles are bad
¤ Long sales cycles are bad
¤ Pricing too low could kill your idea before you start
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DKParker, LLC
2017
Marketing – Finding the right
customers
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DKParker, LLC
2017
Marketing – Finding Customers
¤ Messaging/Value Proposition
¤ Does it resonate with the target customer segment
¤ They are the hero of the story
¤ Is it repeatable?
¤ Strategy
¤ Outbound first
¤ Inbound second
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DKParker, LLC
2017
Key Metric Terms
¤ State your hypothesis
¤ CAC
¤ LTV
¤ ARPU
¤ Churn
¤ Time to Close
¤ Customer engagement
¤ Time on Site
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DKParker, LLC
2017
OrganicSearch
PaidSearch
WordofMouth
SalesCalls
PR
Miracles!
TimetoClose
Month1
Month2
Month3
Month4
$
Spen
d
#
Conv
#
Conv
#
MRR
Time
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DKParker, LLC
2017
Marketing Channels
¤ Paid Search
¤ Organic Search
¤ Word of mouth
¤ Sales calls
¤ Public Relations
¤ Affiliate
¤ Email marketing
¤ Social
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DKParker, LLC
2017
Marketing Qualified Leads
¤ Define qualified vs list
¤ Suspects
¤ Prospects
¤ Qualified Prospects
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2017
Sales Qualified Leads
¤ Hand off to Sales
¤ Identify steps to close
¤ Number of calls
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2017
Time to Close
¤ Lead attribution
¤ Source time
¤ Compressing or Expanding
¤ Trend by source
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2017
Tracking
¤ Data allows you to know where to double
down and where to hold back
¤ Conversion ratios
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DKParker, LLC
2017
Sales – capturing value creation
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DKParker, LLC
2017
How will they buy?
¤ Web Direct – place the order to buy on the web
¤ Direct – outbound sales, inside/outside
¤ Indirect/Channel – fulfills demand, doesn’t generate
¤ Retail – BestBuy, etc
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DKParker, LLC
2017
Sales Model Hypothesis
Known
Market
Unknown
Market
Low
Price
Point
High
Price
Point
Known
Search
Words
Unknown
Search
words
Web Direct
Direct
Indirect
Retail
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DKParker, LLC
2017
Sales
¤ Model – Pick one, why?
¤ Strategy
¤ Who
¤ Tactics
¤ How
¤ Tools
¤ Sales tools
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DKParker, LLC
2017
Business Development
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DKParker, LLC
2017
Business Development
¤ Strategic relationships
¤ Who has the list you want
¤ How do you get the partnership
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DKParker, LLC
2017
Business Development
¤ Strategy
¤ Who should you get as a partner
¤ How will you build the relationship?
¤ What channels
¤ Tactics
¤ Messaging/Value proposition
¤ Tools
¤ CRM
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DKParker, LLC
2017
Revenue Models:
Services = 1
Products =15
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DKParker, LLC
2017
Business and Revenue Models
¤ Business Models – abstract framework of Creating,
Delivering and Capturing Value
¤ Revenue Models (part of business model) is the
framework of revenue, pricing, who pay
¤ Models Lean toward Tech and Product
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DKParker, LLC
2017
1. Fee for Service
¤ Example: Consulting Services company
¤ Use: B2B & B2C
¤ Key Metrics
¤ Project Revenue
¤ Cost of delivering (usually time)
¤ Gross Margin
¤ Services are hard to scale because they require people
to deliver including Restaurant, Contractors, etc.
¤ Services include markup on cost of goods sold
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DKParker, LLC
2017
2. Commerce
¤ Example: Amazon, AmazonSupply
¤ Use: B2C & B2B
¤ Key Metrics:
¤ Wholesale or cost of goods sold
¤ Average Margin %
¤ Average Basket
¤ Commerce – Physical Goods- Wholesale, cost of goods,
retail, average margin, physical good
¤ Notes: Can mature into marketplace
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DKParker, LLC
2017
3. Subscription
¤ Example: Salesforce , Box, Spotify
¤ Use: B2C & B2B
¤ Key Metrics
¤ Average Revenue Per User (ARPU)
¤ Conversion ratio – e.g. trial to purchase
¤ Churn
¤ Challenges: MVP won’t be enough to be Kick Ass Product
¤ Notes: Highest multiple, forecastable revenue
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DKParker, LLC
2017
4. Productize a Service
¤ Your offerings is generally complex and requires services
to deploy
¤ Gross margin on Services >35%
¤ Product development comes with services
¤ Use: B2C & B2B
¤ Examples: Moz, service company convert to tools.
¤ Challenges – difficult to make the transition away from
services
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DKParker, LLC
2017
5. Transaction Fees/Rental
¤ Example: 99Designs, KickStarter, Elance, Chugg
¤ Use: B2C & B2B
¤ Key Metrics
¤ Average transaction revenue
¤ Fee % per transaction
¤ Number of transactions
¤ Challenges: Margins are small (15%), need efficiency
¤ Notes: Don’t start too low
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DKParker, LLC
2017
6. Lead Generation
¤ Example: Mint.com, AllStarDirectories, NetQuote
¤ Use: B2C & B2B
¤ Key Metrics
¤ Cost to generate traffic
¤ % conversion of form data
¤ Price per lead
¤ Challenges: Highly competitive, barrier of entry is low
¤ Notes: Conversion rates average 0.06%
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DKParker, LLC
2017
7. Gaming
¤ Example: King.com/Candy Crush
¤ Use: B2C Only
¤ Key Metrics:
¤ Downloads
¤ % play
¤ Average in app purchase
¤ Challenges – tends to be “hit driven business”
¤ Notes: use in first 21 days is a predictor of success
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DKParker, LLC
2017
8. Marketplaces
¤ Example: eBay, Alibaba
¤ Use: B2C & B2B
¤ Key Metrics
¤ Average Transaction Amount
¤ Number of Monthly Transactions
¤ Commission %
¤ Challenges: two sided market places require you start
with one side, value to seller & Product market fit (x2)
¤ Notes: critical mass or marketplace required
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DKParker, LLC
2017
9. Advertising/Search
¤ Example: Google, Facebook
¤ Use: B2B – advertisers pay, users are free
¤ Key Metrics
¤ Traffic
¤ Click
¤ Avg. revenue/click
¤ Challenges – Scale, need >1M uniques/month to
consider the option
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DKParker, LLC
2017
10. New Media
¤ Example: SnapChat, WhatsApp
¤ Use: B2C only
¤ Key Metrics:
¤ K-Factor (Viral Co-efficient)
¤ Network effect of inviting others to join
¤ Challenges – K-Factor is hard. Little revenue until scale
¤ Notes: Everyone wants to! Not happening in B2B
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2017
11. Combinations
¤ Combinations business models happen for two reasons
¤ You don’t know which model is right
¤ At scale you can expand revenue sources
¤ Examples: Hardware sensors + software services to create
data analytics
¤ Challenges – most require scale or at least traction
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DKParker, LLC
2017
12. Coin/Tokens
¤ Bitcoin and Blockchain have burst onto the scene over
the last couple of years
¤ Blockchain is a technology
¤ Bitcoin is a token, ICOs have been very succesful but
aren’t a security.
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DKParker, LLC
2017
Three that could cost you
everything!
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DKParker, LLC
2017
Three at Scale – Not Launch
13. Multi-sided Marketplaces – Etsy – create products and
customers
14. Big Data – PatientsLikeMe is emerging, but requires
massive data in advance = massive cash
15. Panels – Toluna, precise groups of customer service
research
Dead Model
1. Licensing – the old Microsoft model <pre-subscription>
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DKParker, LLC
2017
Summary – Pick Two (Primary & Secondary)
1. Fee for Servicer
2. Commerce
3. Subscription
4. Productize a Service
5. Transaction Fee/Rental
6. Lead Generation
7. Gaming
8. Marketplace
9. Advertising/Search
10. New Media
11. Combinations
12. Coins Tokens
13. Multi-sided Marketplaces
14. Big Data
15. Panels
16. Licensing
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DKParker, LLC
2017
Pricing
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DKParker, LLC
2017
Your price will be wrong!
Increase it every year and
grandfather early customers for a
period of time
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DKParker, LLC
2017
Art or Science?
¤ Benchmarks
¤ Comparable products
¤ Don’t start too low
¤ Cost base vs Value based
¤ What is the alternate for the “Job to be Done”?
¤ Remember Freemium is a marketing mechanic, not a
price
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DKParker, LLC
2017
Product Pricing
¤ First Product
¤ Staged pricing – up or down over time
¤ Second Product
¤ Staged pricing – up or down over time
¤ Launch timeline based on product road map
¤ Services?
¤ Could it improve you sales cycle
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DKParker, LLC
2017
Financial Modeling
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DKParker, LLC
2017
Templates
¤ Do this after you get in the program – not highest and
best use today
¤ Four Templates
¤ Marketplace
¤ Subscription
¤ Transaction Fee (works for commerce)
¤ Productize a service
¤ www.venturereadymodels.com Promo “Cairo2019”
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DKParker, LLC
2017
Day 2 Deliverables
¤ Write out your Value Prop
¤ Customer Development
¤ Write your questions
¤ Build your forms
¤ Get first 20+ interviews
scheduled
¤ Review your results
¤ Metrics
¤ What are you tracking today?
¤ What should you be tracking
¤ Product Market Fit
¤ Forecast/predictable
revenue
¤ Write out your Product
Roadmap
¤ Pick a:
¤ Marketing Method
¤ Sales Model
¤ Revenue Model
¤ Price
Copyright
DKParker, LLC
2017
THANKS!

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