Managing a Business/Financial Situation Regarding An Application
QUESTION: Hello, Mr. Thompson;
How can I manage cash flow from my app to give out coupons ranging from $5-$50 off to all consumers and break even/profit? The application itself is free, but a consumer can upgrade to a consumer premium at $7.99 per month. There is also a fee that businesses on the app pay, which is $.99 a month. The amount of these competitive businesses in America is 600,000 to 1,000,000 in total. There is also a Business Premium, which is $9.99 per month. Also, there is a $5 friend referral system that we pay a user up to 5 friend referrals. We are looking for VC around $279,000 - $779,000. Financially, how is this possible? (PS: This is a US-based company)
ANSWER: Hello Tyler
Sounds like a business with great potential. I'm assuming that the point of sale is the internet which would lead me to think you have a website with an e-business application installed. You can use Paypal as a payment option, negotiate credit cards yourself through a merchant relationship with your bank or direct debit your customer again arranged with your bank. You will need some good accounting software to keep track of the transactions and there must be a myriad of suppliers because there would be a large number of companies in that market with similiar requirements. Have you thought of simplifying by just adjusting the price.
You need to recognise that products like this have a limited life because of the ever changing market and the need to update for new platforms so you have to identify where your income stream will come from, consumers or business and how you can make longer term links. Think about the fact that in the eye of the customer something is worth what you pay for it so if you are going to reduce the price, some sort of loyalty discount, you can calculate the impact and that has to translate into new business to offset this. You can use optimisation matrix functions in excel or free standing to calculate probable outcomes but without knowing the relative size of both the consumer market and the business market you won't get good results
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QUESTION: Thank you for the response, it was extremely beneficial for us.
I was wondering what sort of "accounting software" you could recommend for our application. And while on the subject, what other software should we consider having? This app is going to a primary focus, so we are trying to formulate everything we could ever need to get the closest of accuracy so we are trying to hear the opinions of experts like yourself as to what is, in your opinion, necessary.
- Tyler R
Once we start getting into depth and detail that becomes a consulting assignment, In addition to accounting software you are going to need an integrated CRM. Depending upon the size of your operation you may need someone like SAP. Requirements evolve over time so deciding at the beginning "everything we could ever need" will delay your project. What it comes down to is how much seed capital do you have