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What issues would you consider when evaluating whether to enter this business / launch this product? (11)
Fundamental Revenue/Cost Drivers
TAM
Segmentation: WTP, Growth Rate, Margin Structure
Market Share (fragmented vs. consolidated)
Barriers to Entry (startup costs, switching costs, mature unit costs, distribution access, regulatory, supply chain access, brand recognition)
Competitve Advantage (Pricing Power vs. Cost Advantage)
Core Competency Synergy
Brand Authority
Cyclicality
Capital Intensity
Payback Horizon & Opportunity Cost
What can we do to drive revenue? (6)
Improve conversion
Revenue management (volume vs. yield)
Pricing / Loyalty promotion
Product expansion
Lifetime value strategies (e.g. loss-leader)
Secondary monetization (ancillaries, ads, data, technology)
What can we do to reduce cost? (3)
Reduce COGS (cheaper direct inputs, volume-based discount on direct inputs)
Economies of scale (spread fixed costs against greater capacity production)
Minimize unit CAC (cheap volume vs. expensive intent)
What are the risks of this decision, and what could go wrong? (5)
Price Elasticity
Adverse Selection
Competitive Response
Operational Capacity
Cannibalization of Existing Business
How would you validate your business case before making an investment? (6)
Isolate key variables (e.g. price & conversion)
Calculate breakeven scenario
Establish Go / No-Go hurdles
Run A/B test at small scale
Track incrementality
Take measures to ensure assumptions
Executive Summary Format (4)
Recommendation
Numeric justification
Underlying Strengths & Risks
Next Steps: A/B Validation, Assumption Assurance
NBs (6)
State the obvious
Ask what the company’s goals are
Any part of the equation can be adjusted when a change happens: never assume that volumes stay static after any change in price
Don’t forget Marketing/CAC
Don’t forget customer impact
Always explain how each change impacts revenue/cost
Qualitative Parties Considered (4)
Customer
Product
Company
Competition