3 builders who never spoke to each other

Do the break-even arithmetic before you buy anything

Work out the units per day that cover fixed costs, and the floor price per item once delivery, fees and any partner cut come out. Businesses die when that sum is done after the equipment is bought rather than before. Derive the tiers themselves from two known quantities: your baseline costs and how often the people you asked said they would turn up.

The method

1. 01

   Work out how many units a day you must sell to break even before you buy any equipment. If the number needs a large number of daily repeat buyers, stop.

2. 02

   Cost the delivery before you cost the product. If the only route to the customer is a delivery app and the drop costs as much as the item, the unit economics never close.

3. 03

   Work out the lowest price you can accept on each item before you promote it, so you know how much room you have for discounts and for an influencer's cut.

4. 04

   Derive your price points from two known things: your baseline costs, and how often the people you asked said they would turn up, so the numbers cover the costs and still read as fair.

What it returned

• 500

  Breaking even needed more than 500 bottles priced at the level of a Starbucks espresso. At one 80ml bottle per person per day that meant 50 highly committed daily customers just to avoid a loss.

• $17.26

  Their formula gave a floor of $17.26 on a shirt that would normally retail at $25.

• Delivery cost as much as the juice itself, and the shot sized format could not carry premium beverage pricing.

• The first surprise was how few people wanted a permanent full time spot, just two or three, while a large number liked the idea of somewhere they could go if they felt like it, including people with their own offices who valued a gathering place existing at all.

Sources

• The ultimate guide to structuring your coworking space membershipsAlex Hillman · dangerouslyawesome.com · How we figured out the levels · 2015-10-01
• Howell Market: How Bad Partners Killed an e-CommerceCody Howell · failory.com · How did you build it? Which was your business model? · undated
• A Juicy $3,000 Mistake: Starting Without Market ValidationWit Sumathavanit · failory.com · What were the biggest challenges you had to overcome? · undated