business-model

name	business-model
description	Guide business model selection from 55 proven patterns, then build pricing strategy and unit economics—LTV, CAC, payback period calculators and April Dunford's competitive positioning methodology. Use when choosing how to make money, pricing a product, or positioning against alternatives.

Business Model Design

Core Principle

A business model isn't a revenue line on a spreadsheet. It's a system that creates, delivers, and captures value. Get the system wrong and no amount of growth fixes it.

Business Model Pattern Selection

The 55 Patterns (St. Gallen Framework) — Key Categories

Category	Patterns	When to Use
Revenue	Freemium, Subscription, Pay-per-use, Razor/blade, Licensing	You need recurring or scalable income
Pricing	Auction, Dynamic, Reverse, Name-your-price	Price discovery is unclear or market-driven
Platform	Marketplace, Two-sided, Ecosystem, Open source + commercial	You connect supply and demand
Unbundling	White label, Franchise, Layer player	You do one thing extremely well
Long tail	Aggregator, Mass customization, Self-service	Many customers, each with small value

Selection Decision Tree

Is your value digital or physical?
├── Digital
│   ├── Can users try before buying? → Freemium / Free trial
│   ├── Is value consumed over time? → Subscription
│   └── Is value per-transaction? → Pay-per-use / Commission
└── Physical
    ├── High upfront cost? → Razor/blade / Lease
    ├── Commodity product? → Subscription box / Membership
    └── Custom product? → Configuration / Mass customization

Pricing Strategy

Three Pricing Levers

1. COST-PLUS: Your cost + margin. Simple, but leaves money on the table.
2. COMPETITOR-BASED: Price relative to alternatives. Safe, but commoditizing.
3. VALUE-BASED: Price relative to customer's outcome. Hard, but highest margin.

Pricing Framework

Factor	Question	Action
Willingness to pay	"What would you pay to solve this?"	Run Van Westendorp price sensitivity
Value metric	"What unit do customers value?"	Charge per seat, transaction, GB, etc.
Price anchoring	"What do they pay for alternatives?"	Position relative to reference price
Expansion path	"How do they grow into you?"	Design tiers that scale with usage

Unit Economics Calculators

Lifetime Value (LTV)

LTV = ARPU × Gross Margin × Average Lifespan (months)

Example:
  ARPU = $99/mo
  Gross Margin = 80%
  Avg Lifespan = 24 months
  LTV = $99 × 0.80 × 24 = $1,901

Customer Acquisition Cost (CAC)

CAC = (Sales + Marketing spend) / New customers acquired

Example:
  Monthly S&M = $50,000
  New customers = 100
  CAC = $500

LTV:CAC Ratio

Target: LTV:CAC ≥ 3:1

  $1,901 / $500 = 3.8:1 ✅ Healthy

Below 3:1 → Acquisition is too expensive or retention is too low.
Above 5:1 → You're probably under-investing in growth.

CAC Payback Period

Payback = CAC / (ARPU × Gross Margin)

  $500 / ($99 × 0.80) = 6.3 months ✅

Target: Under 12 months for SaaS, under 18 for enterprise.

Competitive Positioning (April Dunford)

Obviously Awesome — 5-Step Process

Step 1: Competitive alternatives — What would customers use if you didn't exist?
Step 2: Unique capabilities — What do you have that alternatives don't?
Step 3: Value — What capability maps to a customer outcome?
Step 4: Best-fit customers — Who cares most about that value?
Step 5: Market category — What context makes your value obvious?

Positioning Canvas

Element	Question	Your Answer
Competitive alternatives	"If we didn't exist, what would they do?"
Unique capabilities	"What can we do that they literally cannot?"
Value themes	"So what? Why does that capability matter?"
Best-fit customer	"Who cares the most about this value?"
Market category	"What market frame makes our value obvious?"

Anti-Patterns

Model Theater	Real Model Thinking
"We'll figure out monetization later"	Define value capture before building
"Our TAM is $50B"	"50 customers would pay $X/mo — I asked them"
Pricing based on cost	Pricing based on customer outcome
One price for everyone	Tiered pricing matching customer segments
Ignoring unit economics until Series A	Knowing LTV:CAC ratio from first 10 customers

Power Move

"Analyze my product for competitive positioning using April Dunford's framework. Identify my real competitive alternatives, unique capabilities, and the best-fit customer segment. Then calculate target unit economics I should hit at 100 customers."

The agent becomes your business strategist — connecting product value to a viable economic engine.