By now, you're intimately familiar with the business model canvass.

So in the last lecture, you remember the business model canvas, all the 9 components of a startup.

In customer relationships all the get keep grow metrics, some of which we talked about, some of which you'll discover, what were the customer acquistion costs?

Now we finally come to the last part of the business model canvas.

So one of the interesting equations for every startup is that

That was the customer acquisition cost, CAC, here.

Who are your key partners and suppliers?

So in our last lectures we talked about value proposition, customer segments, distribution channels, customer relationships get, keeping and growing customers.

They need to understand the external environment and they need to come in.

I can't emphasize enough that the business model canvas is just a start.

Well, remember this was to acquire a customer.

How do you actually make money from your product and service being sold to customer segments?

Again, your CAC declines. The idea is what can you do to make this very efficient?

You're all familiar with the business model canvas.

So archetypes really helped us understand our customers, they value prop, the revenue and some of our pricing tactics.

One of the most important metrics to think about now that we have an end to end funnel is something called lifetime value and a lifetime value LTV is not your lifetime but your customer's lifetime.

What's the sum of all the revenue from day 1 purchase, so you're keeping them through all the grow activities you're undertaking.

Seems intuitively obvious but what you want to make sure is the amount of money you're collecting over here is bigger than the customer acquisition cost to remember the amount of money you're spending from here to here.

Lifetime value is the customer lifetime value from beginning to end, and just as a note, remember customer acquisition costs acquired over here, needs to be less than customer lifetime value.

The next is channels.

And in value proposition, the goal of this is to find out that minimum viable product.

If you have world's most perfect business model, investors would love to see this number much bigger than this number and so what you want to look for is a well balanced model that takes into account how much you need to acquire customers but how much ultimately you'll extract from them over the lifetime.

More than likely we'll make money from royalties and commercial licensing, etc.

So now they say, you know what?

If you have your own direct sales people, do the math.

And that can't be repeated enough.

So on day one, these were their initial hypothesis coming into the class.

Just as a reminder, what the teams will be starting with in Week 1 is filling out the business model canvas and getting out of the building and testing their hypotheses about the value proposition, customer segments, and channel.

So, if we take a look at the Jersey² team was worrying about, it's what most start ups worry about on day 1, is does my value prop match my customer segment, and do I have product market fit?

And again, are you getting a viral loop and referral loop from happy and satisfied customers telling others word of mouth and so this is a balancing game, and for first time entrepreneurs who are focused here, it's really important to think about customer acquisition cost and a lifetime value.

Now if you remember we started here on the left. We didn't earn and paid media.

So again you could start either with customer segments or you could start with a product and value prop itself, it really doesn t matter.

Then again for your revenue stream.

And it's usually a technology driven play.

What you need to do is now hear this from customers who say, Here is why it's relevant.

Many companies have huge databases of customer information.

And by the way, we're going to ask later for who are you building it and what exactly does it solve for those people?

Instead of pricing based on cost,

You cater an event where the cost to you was 200

I have no idea where my husband is.

In Telecom, it might be something else but the key idea is you are now not just focused on the initial purchase but you're focused on the lifetime value.

That is they were beginning with a series of hypothesis about their customer archetype.

Notice by the way, while they were working on value proposition, they also had some hypothesis about the customer segments.

Apple is one of the few, truly cares.

Now, by the way in reality, financial people discount the cash flows from customers later in this life cycle.