Putting together a strong business case can make or break your career.
Getting it right might mean the difference between getting buy-in to explore a new opportunity, or to change direction with an existing product.
That in turn means you have the chance to build a product that really matters - and deliver the kind of results that will supercharge your CV.
Even better, it means leadership will respect you. They will see you as a business leader, not just a product leader. That respect means more trust. More trust means a greater ability to set the direction for your products & organisation. A greater ability to set direction means more autonomy, more purpose and, very likely, promotion & salary increase.
Get it wrong, however?
And you’ll not get buy-in, not be seen to really “get” business & - as usually happens - remain stuck at a PM/Senior PM level.
The Big Mistake Most PMs Make
I’ve seen over 300 business case studies from Prod MBA students.
As a product case study, these are usually very strong; there’s a good overview of the problem space, the opportunities they identified in the market, the product vision, product strategy, outcome-driven roadmap - even results from their initial prototype.
However, they are usually weak when it comes to what would make the product succeed as a business.
That means clarity over costs v. revenue.
For example, a student will say, “We believe a subscription model would work well for this product.” 😔
I say, “Great. Have you run the rough numbers on that?” 🤔
The answer?
Usually, no. 😬
Now…
I don’t expect students to come out with pages of spreadsheets mapping out 5 years of financial projections — nor do I think that is helpful in any way.
What I do expect is for them to have done the basic maths.
For example, if they are going to charge $10/month, what % of users do they expect to convert from free to paid subscription? Does that mean they will bring in more revenue than their costs? What does that look like as the business scales?
The mistake?
Pick a business model (e.g. subscription) without considering 4 key factors:
4 Factors To Include In Your Business Case
To dramatically improve how you present product opportunities as business opportunities, it’s essential to consider the following:
💸 1. Managing costs: At a minimum, we need to have a rough idea of our total costs before we even think about pricing, or we’ll bankrupt the business (unless we are a VC-funded startup 😂)
E.g. Say we start a mentorship platform where students pay per session, how much will the platform cost us? Any development costs required? Subscriptions? What about how much we will need to pay the mentors?
📊 2. Volume: How many are we expecting to sell? How does that impact possible pricing? And our costs? We can never predict sales, but we can model out different outcomes here to help inform our business model
E.g. Do we pay mentors the same for 1 v. 10 sessions? Will we do deals for mentees if they book more sessions too? Do we need to pay more for our content platform if we have 10,000 v. 100 users?
⭐️ 3. Understanding value: Many product people think pricing is related to costs (e.g. “If it costs us £90 to make it, let’s add 10% on top & price it at £100”). That is wrong. Instead, pricing is about perceived value i.e. how much the target customer seems to value your product. If very valuable, price high. If low value, maybe look at how to stack different pieces of value into a bundle to increase perceived value (and thus ability to price high)
e.g. How do our target customers think about mentorship? What’s the “standard” price? How might we stack more value to differentiate - and thus charge more than that? Could we reframe our offer from “mentorship” to something new & better?
💲 4. Setting pricing: Once we understand our costs, and how those costs might change with different volume, we can then look at perceived value and price as high above our costs as we think possible
e.g. How much should we charge per session? Or should we price through regular subscription? Can we set a high price? Is it above our costs?
These aren’t complex questions to ask ourselves.
Nor, again, does it mean we need to build a detailed financial model.
Just do the maths (e.g. A mentorship session will cost us $20. We see the value of it at $50. Adding other fixed costs, profit per session should be from $5-10).
So…
Next time you’re in an interview presenting a case study, or discussing how to improve the company’s product…
Or when you’re next presenting a new opportunity to leadership…
Show you understand these 4 factors & the nuances of whatever business model you have chosen.
You’ll immediately stand out from the crowd as not just a good product person who understands the user, but one who understands business as well.
And that - a PM with strong business skills - is something leadership really value.