02.7 · Capability in Strategy

Business models

How the product creates, delivers and captures value. Every technical and product decision eventually shows up in the costs or the revenue.

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02.7.1Revenue modelsThe ways a product earns money, such as subscriptions, usage or transactions.
02.7.2PricingSetting what customers pay, based on value, costs and alternatives.
02.7.3PackagingGrouping features and limits into plans and tiers.
02.7.4Costs and marginsWhat it costs to build and run the product compared with what it earns.
02.7.5Customer lifetime valueThe total revenue a customer brings over their whole relationship with the product.
02.7.6Return on investmentComparing what a piece of work returns with what it costs.

Mark all 6

Where to start

3 resources

articleStart here
SaaS pricing models: a guide ↗
Stripe · 2023 · 15 min
Flat, tiered, per-seat and usage pricing compared, with when each one fits.
articleStart here
16 startup metrics ↗
Andreessen Horowitz · 2015 · 18 min
Clear definitions of the business metrics investors ask about, such as bookings, recurring revenue and lifetime value.
articleGo deeper
SaaS Metrics 2.0: a guide to measuring and improving what matters ↗
David Skok · 2013 · 35 min
The standard long-form reference for MRR, churn, LTV and CAC, with the formulas and the reasoning behind them.

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