For Starters #44: Napkin Math
Let's at least pencil out, some measure of, profitability.
Back in For Starters #17, I talked about the benefit of roughing out pricing against paying for your lifestyle and how that number has ripple effects across who your customers are, the price points you sell at, and what the offerings look like.
Since writing that a year ago, I’ve talked to more founders that are putting off pricing until the product is completed…or until they get to the proposal stage with a client…whichever comes first.
As I’ve ranted about the perils of over-investment across this entire series, I knew there needed to be a quick way for founders to pencil out value-based pricing as they conduct customer discovery, as they prioritize features, as they negotiate sales.
Enter Napkin Math.
A free .xls (or .numbers, just ask) that provides initial value-based price ranges, sales counts, and lead counts with just a revenue goal and an estimated customer value.
Use this to think through your pricing and ask yourself questions like:
Where would I find 42 new qualified leads this week?
What would the product need to be to be worth $2,000/month?
What would I need to confidently land 3 sales this month?
When would this business pay for my lifestyle?
Important questions that can help you confirm you’re on the right track without over-investing in product, software, or advertising.
Of course, if you need help interpreting the numbers or mapping them better to your business - book a call.