After honing your idea with the Overview Framework you need to consider how the business will make money. Dium created the Monetization Framework to help answer the question of “How will you spend and make money?”
The Monetization Framework starts with keeping your mission and product/service top left so you have a starting point to build off of. Next are your end scenarios for your business in order to keep you pointed in the right direction, while also keeping you motivated as you go through the framework. By giving you a starting point and a direction to think in, the rest of the framework shouldn’t be too hard to fill out. Also, as you work your way through the framework, don’t be afraid to go back and hone these sections. Remember, the first version of an idea is never usually the best or final version.
The first new section to work through is to help you list out what needs to be done in order to launch your startup. Some examples of starting activities are listed in the section to help you get going. This will set the stage for the rest of the sections. For instance, having a business that needs a server might mean you have to look into which server business rent from and will directly affect your operating expenses. As a restaurant, setting up supply contracts/partnerships will have a direct effect on your pricing due to margins, and affect your operating expenses.
As noted above, the four sections in the middle of the framework encapsulate the spending and revenue cycle that your business will go through, as well as who/what you need to do in order to succeed. The Burn Rate is an important box as after going through your operating expenses, having this number clearly shown will go a long way in helping you understand how much business you need in order to sustain yourself. Burn Rate is defined as how much money it takes to operate your business over a certain period of time, typically the period of time chosen is a one-month time frame.
Finally, the last two sections on the bottom right of the framework are to help you establish goals to make it to your end scenarios. These goals will vary on what your business is, but using metrics that are important for your business is a good place to start. For example, an e-commerce business might use daily visits as a metric to make sure they are getting enough traffic through their site. Based on this traffic and their ability to convert a certain percentage of the traffic into paying customers, they can start tracking how close they are to reaching their end scenarios.
Hopefully, the Monetization Framework helps you with formulating the business side of your idea,
Next week, we will be going through the Marketing and Sales Framework. The Marketing and Sales Framework was created to help you answer the question, “How will you get customers?”
"Beware of small expenses; a small leak will sink a great ship." - Benjamin Franklin