Business Plan Preparation Revenue Model Frank Moyes Leeds College of Business University of Colorado Boulder, Colorado Revenue Model

Two Approaches Top down – market penetration & timing Bottom up – pipeline, revenue by customer Revenue Model

Revenue Drivers Depends on market Examples Market penetration Market size & growth Price & discount Capacity utilization rate Sales cycle Lead time Response rate Churn rate How measure? Revenue Model

Revenue Model (Top Down) Market size - number of customers, transactions or units, purchases Growth rate Market penetration rate Frequency of purchase – per day, week, month Capacity Utilization Product or services Initial product/service Roll out - new services or product introductions Prices Price per customer, transaction or unit Average revenue per customer or transaction Channel strategy - discount Revenue Model

Revenue Model (Bottom-up) Identify specific customers Identify decision maker Determine Annual purchases Level of satisfaction with current suppliers What do you need to do to for them to purchase If you meet the criteria, how much business can you expect Revenue Model

What is a Revenue Model? Market potential Market share Size & growth Market share Penetration rate Roll-out strategy Product/Service offered Range & mix New Products/Services Obsolescence Frequency of purchase – per day, week, month Capacity Utilization Channel strategy - discount Prices Revenue Model