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← Week 08: Validate at scale: the business model and the AI bet SESSION 01 · TUESDAY

Value people will pay for, at a cost you can sustain

Loop 1 showed people use your product. Tonight you test what they will pay, and whether each customer earns back what they cost.

Business modelPricingWillingness to payUnit economicsTrial or pilot
Present slides Full screen, one slide at a time · 12 slides
TONIGHT 01

Tonight you check whether this can be a business

  • Sketch your business model on a page: customer, value, channel, revenue, costs
  • Choose a pricing approach: value-based, cost-plus or competitor-referenced
  • Design a willingness-to-pay test with a threshold written before any result
  • Calculate acquisition cost, payback, churn and lifetime value, measured and assumed apart
  • Decide between a free trial, freemium and a paid pilot, and say why

OUTPUT · Business model, pricing test card, unit economics: product/08-business-model.md

THE METHOD 02

Your business model on a page

  1. CUSTOMERWho pays, and who uses. TutorDesk: tutors with 15+ learners pay; parents book free.
  2. VALUEWhat they gain, in their terms. TutorDesk: no lost requests, 2 hours a month back.
  3. CHANNELHow they find and buy it. TutorDesk: tutor groups, referrals, parents seeing the link.
  4. REVENUEHow money comes in. TutorDesk: a monthly subscription; £8 is still a guess.
  5. COSTSWhat it takes to run: hosting, messages, support, soon AI calls. Fixed and per customer.

A box you can only fill with a guess is your next experiment, not a footnote.

THE METHOD 03

Three ways to set a price

  1. VALUE-BASEDStart from what it’s worth to them, then take a share. £8 is about 13% of £60 of value.
  2. COST-PLUSStart from your cost and add a margin. £2 to serve × 3 = £6. Simple, but blind to value.
  3. COMPETITOR-REFERENCEDAnchor on alternatives they know. WhatsApp is free, so £8 must clearly beat free.

Value sets the ceiling, cost sets the floor, and the alternatives shape how you explain the price.

THE METHOD 04

Willingness-to-pay tests, from weakest to strongest

  1. PRICE QUESTIONSVan Westendorp’s four questions: too cheap, a bargain, getting expensive, too expensive.
  2. PRE-ORDERA written commitment to a stated price and start date. In this course, no money is taken.
  3. PRICING-PAGE FAKE DOORShow plans and prices; count who picks one. Then say plainly it isn’t live yet.

What people say about price is a hint. What they choose or commit to is evidence.

WORKED EXAMPLE · TUTORDESK 05

TutorDesk: from an £8 guess to evidence

Starting point

“Tutors said £8 sounded fair, so £8 it is.”

Reframed

Ask 12 busier tutors the four price questions, then show a pricing page with £8 and £12 plans. Set first: if 4 of the first 10 pick £12, test £12. Illustrative.

Ask

  • Which evidence level is “sounded fair”?
  • Why ask busier tutors, not all 20?
  • What should the page say after a click?
  • What result would make us keep £8?
THE METHOD 06

Unit economics: is one customer worth winning?

  1. ACQUISITION COSTWhat it costs to win one paying customer. £120 of ads ÷ 6 new tutors = £20.
  2. PAYBACKMonths to earn that back from margin, not price. £20 ÷ £6 a month ≈ 3.3 months.
  3. CHURNThe share of customers who leave each month. 1 of 20 tutors left = 5% a month.
  4. LIFETIME VALUEMonthly margin × average months stayed (1 ÷ churn). £6 × 20 months = £120.

All TutorDesk figures are illustrative. Lifetime value should comfortably exceed acquisition cost.

WORKED EXAMPLE · TUTORDESK 07

TutorDesk’s numbers: measured and assumed, kept apart

Starting point

“Lifetime value: £8 × 5 years = £480, so we can spend £400 to win each tutor.”

Reframed

Measured, with base: 1 of 20 tutors left last month. Assumed: £20 to acquire, £2 to serve. So £6 margin, 3.3-month payback, £120 lifetime value. All illustrative.

Ask

  • What three mistakes does the weak version make?
  • What happens to lifetime value if 2 of 20 leave?
  • Which assumed number would you measure first?
  • How many tutors before 5% churn means much?
THE IDEA 08

Free trial, freemium or a paid pilot

Free trial or freemium

  • Free trial: the full product for a set time, such as 14 days, then pay or stop
  • Freemium: a free plan for ever, with limits or extras you pay for
  • A trial fits when value shows fast: for TutorDesk, the first confirmed booking
  • Every free user still costs you hosting, support and any AI calls

Paid pilot

  • A few customers pay a reduced price for a fixed period, with goals agreed up front
  • The strongest price evidence: a commitment before the product is finished
  • Fits when value takes weeks to show, or when the buyer is a business
  • TutorDesk: 5 busier tutors, 3 months at £5, then £12 if goals are met (illustrative)

Choose the offer that produces the evidence you most need, not the one that grows sign-ups fastest.

CLAUDE STUDIO 09

Claude Studio: pressure-test the model, then a calculator

Prompt for Claude
Here is the business model and unit economics for [MY PRODUCT]. Each number is marked measured (with its base) or assumed:
<model>[PASTE BUSINESS MODEL AND NUMBERS]</model>
I’m choosing which price to test next month, so I want to know where this model is weakest before I rely on it. Find the three assumptions that would most change payback or lifetime value if they were wrong, and show the arithmetic for a pessimistic case. If something can’t be judged from what I’ve given you, say so rather than estimating it. Then build a small calculator as an Artifact: inputs for price, cost to serve, acquisition cost and monthly churn; outputs for margin, payback months and lifetime value, with each formula shown. Done is three ranked weak points and a calculator I can check by hand.

Check the response

  • Lifetime value uses margin, not price
  • TutorDesk inputs give 3.3 months and £120
  • Benchmarks without a source are labelled guesses
WORKSHOP · YOUR PRODUCT 10

Workshop: your business model and price test

Put your business on one page, design one honest price test, and work out what one customer is worth, with every number labelled.

  1. Fill the five boxes; mark each line measured (with its base) or assumed (8 min)
  2. Set a price three ways; write the ceiling, the floor and the price you’ll test (8 min)
  3. Write a pricing test card: hypothesis, test, metric, threshold, decision (12 min)
  4. Work out acquisition cost, payback, churn and lifetime value; check them in the calculator (15 min)
  5. Choose trial, freemium or paid pilot; pressure-test with Claude and revise (12 min)
Deliverable

All three in product/08-business-model.md, measured and assumed apart

GATE 11

Gate: the business model

  • All five boxes are filled, naming the payer and the user even when they differ
  • The price is set from value, cost and alternatives, with the ceiling and floor written
  • The pricing test card has a threshold and a decision for each result, set before results
  • Payback and lifetime value use margin, not price, with the arithmetic shown
  • Every number is labelled measured (with its base, e.g. “1 of 20”) or assumed
  • The trial, freemium or pilot choice names the evidence it will produce

HOMEWORK · Run the price test this week; log each answer and click in product/evidence/ with its base.

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