1. BOOTCAMP SOCIAL INNOVATION ACCELERATOR TO CREATE LASTING CHANGE
POWERED BY SANTANDER
developed in partnership with

2. COST MODELLING A QUICK SKETCH WAY TO MAKE SURE YOUR NUMBERS WORK

3. David Evans
CEO, Geode Software, Inc.

4. Mentor Prep + Cost Assumptions
Business Model Validation Lab
Identify Assumptions
Rapid Prototyping
Mentor Prep + Cost Assumptions
Strategic Planning
Customer Discovery
Customer Validation
Mentor Feedback
Keep Momentum

5. THIS IS A “FINANCIAL” PROTOTYPE

6. HOW WE GET THERE
Estimate
Validate
Refine

7. WHAT ARE WE ESTIMATING? EARNED REVENUE
Any and all amounts charged to customers, users, or beneficiaries related to delivery of your product or services.
EARNED REVENUE
All costs directly associated with delivery of your product or service.
COST OF GOODS
Revenue minus cost of goods. This is your profit, or if it’s negative, your funding gap on service delivery
GROSS MARGIN
All of the costs to just keep the lights on (pun intended) such as salaries, web hosting, rent, etc
OPERATING EXPENSEE
Gross Margin minus Operating Expenses. This is your income, or if it’s negative, your losses/funding gap
NET PROFIT
The amount of philanthropic dollars that will need to be raised to cover any shortfall in earned revenue
FUNDING GAP
The number of “units” to be delivered in order to sustain operations from revenue, if possible
BREAK EVEN

8. BUT IT’S JUST AN ESTIMATE

9. SO LET’S VALIDATE! How confident are you in your estimates?
Low Confidence – No external validation
Medium Confidence – Some validation, but limited in scope
High Confidence – Fully validated
What’s your plan to get to high confidence?
Definition of a prototype

10. EXERCISE TIME!

11. EXAMPLE WORKSHEET

12. ONE MORE WAY TO LOOK AT IT
Unit economics - Direct revenues and costs associated with a particular business model expressed on a per unit basis
Understand your incremental costs to increase your impact
Explain the economies of scale as you grow

13. LESSONS TO TAKE AWAY Creating a Model Validating a Model
This is merely a model to understand your financial assumptions
Use an approach that makes sense to you
Can you execute within these parameters?
How does your model scale?
This is not a budget, it can and should change
Customers will validate revenues
Vendors and partners will validate cost and expenses
Minimize the unknowns

14. QUESTIONS?