A calculated risk

A calculated risk is a carefully considered decision that exposes a person to a degree of personal and financial risk that is counterbalanced by a reasonable possibility of benefit. Assessing whether or not a risk is worth it involves careful cost-benefit analysis.

I have been asking why I am not taking some risk on building our business. I know certain areas that can bring more results and even improve profitability. These include creating better processes and systems, leveraging clean code and maintenance, improving the messaging from every part of the company, standardizing communication across the company, eliminating cost centre work and politely saying no, running more smaller experiments, coaching people to become more growth mindset, accepting reality as it is etc.

Actual businesses have to deal with actual things like bills and payroll. Actual businesses worry about profits from day one. Actual businesses don’t mask deep problems by saying, “It’s OK, we’re a startup.” Act like an actual business and you’ll have a much better shot at succeeding.

from book Rework

I may need courage, but I can take a calculated risk to build a business that generates half a million. You can calculate the revenue on the back of the envelope like this about 400-425 clients paying about 100 GBP per month OR 270-280 clients paying about 150 GBP per month OR 200-210 clients paying about 200 GBP per month.

Growth without creating a new Product

Key factors should be in place for a new revenue model

  1. Selling should be online without touch point.
  2. It needs a free or trail options
  3. Incorporate braggable and network effect
  4. The value must be 10X each month
  5. Feedback loop from community (potential 100)
  6. Feedback loop from Probench managers (250)

In order to do that the first thing we need to do in our current business is to draw lines and create a NO list here is the short summary.

  1. No customization of software.
  2. Saving No to clients who doesn’t fit within our core competency
  3. Stop chasing perfection and delivering good enough value
  4. Saying to big operation work
  5. Saying No to free updates
  6. Saying No to product road map
  7. Saying No to long team meetings
  8. Saying No to non value added work
  9. Saving No to people who don’t align with our vision and culture
  10. Sharing our No list with our clients and taking feedback

One product cannot make it all happen. So we need multiple streams of income and here is another list of imagination

  1. Global List Analysis – One time – 50 GBP
  2. Cleaning Data Scripts – One time – 500 GBP
  3. Standard Workshop – One time – 5000 GBP
  4. Scorecard Design Call- One time – 250 GBP
  5. Technical Scoring Call – One time – 250 GBP
  6. First Steps of DS Call – One time – 250 GBP
  7. Costovation Session – One time – 2500 GBP
  8. Scorecard tempate – One time – 500 GBP
  9. Data Science Scripts – One time – 500 GBP
  10. Self Assessment Scorecard – One time – 100 GBP
  11. Scoring Calculator – Montly – 50 GBP
  12. Probench (our Product) – Montly – 400 GBP

On average we will need 750 to 1250 clients to reach that revenue. It’s a big undertaking and I am not 100% sure if it is even possible.

What is possible?

  1. To create a community of 100 active memebers
  2. To dive deep in the scoring methodology
  3. To find 10X value in data science
  4. To find insights from the Probench data
  5. To leverage team towards 1 vision

What is the 1 calculated risk I have to take?

Invest time and effort that can help me discover 1 idea that can create 100K in revenue in a year with 100 clients. That means I need to solve a problem worth 10K so that we can charge them 1K. Only 10 member team needs to run the operation and the service needs to be scaled for 1000 clients.

Let me break it down for you. It means I can start with 100 clients who are ready to pay 100. It further means 10 clients ready to pay 100. It can also mean getting 1st client who is ready to pay 100. It could also mean to get a client who pays nothing and makes 1000 in return because of our product or services.

It also means to create simple tools and scripts that can be made within 1 month which creates value for clients worth 1000. Does that mean going back to our clients and asking them what services they are ready to pay 100 bucks from their pocket, which can create value worth 1000 GBP? It means creating 10 tools/script/info products that can be sold to 10 teams or individuals. It can also mean can we create a tool or script worth 1000 GBP in 1 week?

Can we add 1k value for 10 iterations to create a tool or script worth 10k in 1 week? Your mind is either blown away with the imagination or completely confused by the magic of 1 and 0. Imagine if we end up creating 100 such tiny products each worth 10k and we are selling it worth 1K. It will give us leverage with only 100 clients to sell them tools and scripts for 10K each making us reach a million pounds revenue.

The magic is even if you end up creating ten tools and sell them for 1000 each to 10 existing clients, you end up making an additional 100K.

Vikram Shetty

The most important thing is discipline which means we have to follow the seven pillars of our culture. It also means eliminating every tiny waste and embracing all the leverage available.

You may ask what about next year?

We have 100 sets of tools and scripts, which are valued at a total of 1 million pounds. I am sure we can figure something out. Compared to the value we currently have in Probench with the arithmetic of 10X, the value is about 48,000.

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