417 lines
10 KiB
Markdown
417 lines
10 KiB
Markdown
# Financial Models & Projections
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## Capital Requirements Summary
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### Phase 1: Integration Consulting
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**Total Capital**: $500
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- LLC registration: $100-300
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- Website (Carrd/WordPress): $0-200
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- Business cards: $50
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- Marketing materials: $50
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**Source**: Personal funds (out of pocket)
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### Phase 2: Edge Monitoring Platform
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**Total Capital**: $1,000
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- GTHost server (2 months): $200-300
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- Development/testing: Nights/weekends (sweat equity)
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**Source**: Phase 1 consulting revenue
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### Phase 3: GPU-Powered AI
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**Total Capital**: $3,000
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- GPU server (3 months): $1,050-1,350
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- ML model development: Nights/weekends
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- Marketing materials: $200
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**Source**: Phase 2 platform profits
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**TOTAL 18-MONTH CAPITAL**: $4,500 (self-funded)
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---
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## Revenue Models by Phase
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### Phase 1: Consulting Only
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**Revenue Streams:**
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- Hourly consulting: $150-200/hour
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- Project fees: $15k-40k per project
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- Optional retainer: $2k-5k/month
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**Monthly Revenue Projection:**
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| Month | Projects | Hourly | Total Revenue |
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|-------|----------|--------|---------------|
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| 1 | 0.5 pilot | - | $5,000 |
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| 2 | - | 40hrs | $7,000 |
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| 3 | 1 full | - | $25,000 |
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**90-Day Total**: $37,000 (conservative)
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**Cost Structure:**
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- Direct costs: ~$500 (one-time setup)
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- Ongoing: $50/month (website, tools)
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- **Gross Margin**: 95%+
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---
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### Phase 2: Hybrid Model
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**Revenue Streams:**
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- Consulting (declining): $10k-20k/month
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- Setup fees: $5k-10k per customer
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- Monitoring MRR: $1.5k-2k per customer
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**Monthly Revenue Evolution:**
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| Month | Consulting | Setup Fees | MRR | Total |
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|-------|-----------|------------|-----|-------|
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| 4 | $15,000 | $10,000 | $0 | $25,000 |
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| 5 | $15,000 | $5,000 | $1,500 | $21,500 |
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| 6 | $15,000 | - | $3,000 | $18,000 |
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| 7 | $12,000 | $10,000 | $5,000 | $27,000 |
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| 8 | $10,000 | $5,000 | $7,000 | $22,000 |
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| 9 | $10,000 | - | $10,000 | $20,000 |
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**Month 9 Totals:**
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- Consulting: $10,000
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- MRR: $10,000 (6-7 customers @ $1.5k avg)
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- **Total Monthly**: $20,000
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**Cost Structure:**
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- GTHost server: $150/month
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- Tools/software: $100/month
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- **Gross Margin**: 87%
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---
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### Phase 3: Recurring Revenue Focus
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**Revenue Streams:**
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- Basic monitoring: $1.5k × 10 customers = $15,000/month
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- Premium AI: $5k × 4 customers = $20,000/month
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- Occasional consulting: $5,000/month
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- **Total MRR**: $40,000/month
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**Customer Mix (Month 18):**
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| Tier | Customers | Price/Month | Revenue |
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|------|-----------|-------------|---------|
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| Basic | 10 | $1,500 | $15,000 |
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| Premium | 4 | $5,000 | $20,000 |
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| Consulting | - | - | $5,000 |
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| **Total** | **14** | - | **$40,000** |
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**Cost Structure:**
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- GTHost servers (2): $550/month
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- Contractor: $5,000/month
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- Tools/software: $200/month
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- **Total costs**: $5,750/month
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- **Gross Margin**: 86%
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- **Net Profit**: $34,250/month
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---
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## 18-Month Financial Projection
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### Revenue Breakdown
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| Month | Consulting | Setup Fees | Basic MRR | Premium MRR | Total Revenue |
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|-------|-----------|------------|-----------|-------------|---------------|
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| 1 | $5,000 | - | - | - | $5,000 |
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| 2 | $7,000 | - | - | - | $7,000 |
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| 3 | $25,000 | - | - | - | $25,000 |
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| 4 | $15,000 | $10,000 | - | - | $25,000 |
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| 5 | $15,000 | $5,000 | $1,500 | - | $21,500 |
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| 6 | $15,000 | - | $3,000 | - | $18,000 |
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| 7 | $12,000 | $10,000 | $5,000 | - | $27,000 |
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| 8 | $10,000 | $5,000 | $7,000 | - | $22,000 |
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| 9 | $10,000 | - | $10,000 | - | $20,000 |
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| 10 | $8,000 | $10,000 | $12,000 | - | $30,000 |
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| 11 | $7,000 | - | $13,500 | - | $20,500 |
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| 12 | $5,000 | $10,000 | $15,000 | $5,000 | $35,000 |
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| 13 | $5,000 | $5,000 | $15,000 | $10,000 | $35,000 |
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| 14 | $5,000 | - | $15,000 | $10,000 | $30,000 |
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| 15 | $5,000 | $10,000 | $15,000 | $15,000 | $45,000 |
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| 16 | $5,000 | - | $15,000 | $15,000 | $35,000 |
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| 17 | $5,000 | - | $15,000 | $20,000 | $40,000 |
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| 18 | $5,000 | - | $15,000 | $20,000 | $40,000 |
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**Cumulative 18 Months**: $480,000
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---
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### Cost Breakdown
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| Month | Infrastructure | Labor | Tools | Marketing | Total Costs |
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|-------|----------------|-------|-------|-----------|-------------|
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| 1 | - | - | $500 | - | $500 |
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| 2 | - | - | $50 | - | $50 |
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| 3 | - | - | $50 | - | $50 |
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| 4 | $150 | - | $100 | - | $250 |
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| 5 | $150 | - | $100 | - | $250 |
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| 6 | $150 | - | $100 | - | $250 |
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| 7 | $150 | - | $100 | $200 | $450 |
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| 8 | $150 | - | $100 | - | $250 |
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| 9 | $150 | - | $100 | - | $250 |
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| 10 | $550 | - | $200 | - | $750 |
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| 11 | $550 | - | $200 | - | $750 |
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| 12 | $550 | - | $200 | - | $750 |
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| 13 | $550 | $3,000 | $200 | $200 | $3,950 |
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| 14 | $550 | $3,000 | $200 | - | $3,750 |
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| 15 | $550 | $4,000 | $200 | - | $4,750 |
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| 16 | $550 | $5,000 | $200 | - | $5,750 |
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| 17 | $550 | $5,000 | $200 | - | $5,750 |
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| 18 | $550 | $5,000 | $200 | - | $5,750 |
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**Cumulative 18 Months**: $33,950
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---
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### Profit Summary
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**18-Month Totals:**
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- Total Revenue: $480,000
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- Total Costs: $33,950
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- **Total Profit**: $446,050
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- **Average Monthly Profit**: $24,780
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- **ROI**: 9,921% (on $4,500 invested)
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**Month 18 Snapshot:**
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- Monthly Revenue: $40,000
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- Monthly Costs: $5,750
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- **Monthly Profit**: $34,250
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- **Annual Run Rate**: $411,000/year profit
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---
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## Break-Even Analysis
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### Phase 1 (Consulting)
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**Break-even**: Month 1
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- Need: 1 small project ($5k-10k)
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- Covers: All startup costs
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### Phase 2 (Platform)
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**Break-even**: 2-3 monitoring customers
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- Need: $3k-4.5k MRR
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- Covers: Infrastructure + development costs
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### Phase 3 (Premium AI)
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**Break-even**: 1-2 premium customers
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- Need: $5k-10k from premium tier
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- Covers: GPU server costs
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---
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## Customer Lifetime Value (LTV) Analysis
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### Basic Monitoring Customer
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**Monthly**: $1,500
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**Average Retention**: 24 months
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**LTV**: $36,000
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**Setup Fee**: $5,000
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**Total LTV**: $41,000
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### Premium AI Customer
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**Monthly**: $5,000
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**Average Retention**: 30 months (stickier)
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**LTV**: $150,000
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**Setup Fee**: $10,000
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**Total LTV**: $160,000
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---
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## Customer Acquisition Cost (CAC)
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### Phase 1 (Consulting)
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- Outreach time: ~10 hours per customer
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- Marketing: $50-100
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- **Total CAC**: $500-700 (labor + marketing)
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- **Payback Period**: First project (immediate)
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### Phase 2 (Platform)
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- Transition from consulting: $0 (existing customer)
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- New customer: ~20 hours + $200 marketing
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- **Total CAC**: $1,000-1,500
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- **Payback Period**: 0.7-1.0 months
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### Phase 3 (Premium)
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- Upgrade from basic: $500 (sales time)
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- New premium customer: ~40 hours + $500 marketing
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- **Total CAC**: $2,500-4,000
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- **Payback Period**: 0.5-0.8 months
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---
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## LTV:CAC Ratios
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**Phase 1 (Consulting)**:
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- Project LTV: $25,000 (avg)
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- CAC: $600
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- **Ratio**: 42:1 ✅ Excellent
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**Phase 2 (Basic Monitoring)**:
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- LTV: $41,000
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- CAC: $1,250 (avg)
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- **Ratio**: 33:1 ✅ Excellent
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**Phase 3 (Premium AI)**:
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- LTV: $160,000
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- CAC: $3,000 (avg)
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- **Ratio**: 53:1 ✅ Excellent
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**Industry Benchmark**: 3:1 is good, 5:1+ is excellent
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---
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## Pricing Strategy
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### Phase 1: Consulting
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**Hourly Rate Logic**:
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- $150-200/hour = competitive for OT expertise
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- Positions below enterprise consultants ($300-500/hour)
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- Above general IT ($75-150/hour)
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**Project Pricing**:
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- Small (40-80 hours): $15k-25k
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- Medium (100-150 hours): $25k-35k
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- Large (150-200 hours): $35k-50k
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### Phase 2: Monitoring Platform
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**Tier Logic**:
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| Tier | Monthly | Setup | Target Customer |
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|------|---------|-------|-----------------|
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| Basic | $1,500 | $5,000 | 1 production line |
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| Pro | $2,000 | $7,500 | 2-3 lines |
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| Enterprise | $3,000+ | $10,000+ | Full facility |
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**Pricing Rationale**:
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- 10x cheaper than enterprise solutions ($15k-30k/month)
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- 2-3x more than DIY (but includes support)
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- Predictable vs cloud per-message pricing
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### Phase 3: Premium AI
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**Tier Logic**:
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| Tier | Monthly | Setup | Differentiation |
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|------|---------|-------|-----------------|
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| AI Basic | $4,000 | $10,000 | Predictive maintenance |
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| AI Pro | $6,000 | $15,000 | + Computer vision |
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| AI Enterprise | $8,000+ | $20,000+ | Custom models |
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**Value Justification**:
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- If prevents ONE unplanned downtime event: $50k-500k saved
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- If extends equipment life 10%: $100k+ value
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- If improves quality 2%: Hundreds of thousands in savings
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---
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## Cash Flow Management
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### Key Principles
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1. **Consulting Funds Platform**: Use project revenue for infrastructure
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2. **50% Deposits**: Always collect upfront on projects
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3. **Monthly Billing**: Subscriptions billed 1st of month
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4. **3-Month Runway**: Maintain in reserves
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5. **Reinvest Profits**: Use for growth until $100k saved
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### Month-to-Month Cash Flow
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**Months 1-3** (Pure Consulting):
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- Inflows: Project payments
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- Outflows: Minimal ($50-500/month)
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- **Accumulation**: $20k-40k cash reserve
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**Months 4-9** (Platform Build):
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- Inflows: Consulting + setup fees + MRR
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- Outflows: Infrastructure + time
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- **Accumulation**: Building to $50k-80k
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**Months 10-18** (Scale):
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- Inflows: MRR + premium + occasional projects
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- Outflows: Infrastructure + contractor
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- **Accumulation**: $100k-200k reserves
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---
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## Scenario Analysis
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### Conservative Scenario
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- 50% of projected customer count
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- 75% of projected pricing
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- **Month 18 Revenue**: $20,000/month
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- **Month 18 Profit**: $15,000/month
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- **Still viable**: Yes, above typical job salary
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### Base Case (Projected)
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- As modeled above
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- **Month 18 Revenue**: $40,000/month
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- **Month 18 Profit**: $34,000/month
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### Optimistic Scenario
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- 150% of projected customers
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- Faster phase transitions
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- **Month 18 Revenue**: $60,000/month
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- **Month 18 Profit**: $52,000/month
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**All scenarios are profitable and viable.**
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---
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## Exit/Growth Options
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### Option 1: Keep Bootstrapping
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- Grow to 50-100 customers
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- $150k-300k/month revenue
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- Hire 5-10 person team
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- Owner salary: $200k-500k+/year
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### Option 2: Raise Capital (Year 2-3)
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- Platform proven at scale
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- Raise $1-3M seed round
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- Accelerate growth (sales, marketing)
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- Exit in 3-5 years
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### Option 3: Strategic Acquisition
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- System integrator acquires for customer base
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- Controls vendor buys for technology
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- Valuation: 3-5x annual revenue ($1.5M-7.5M range)
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### Option 4: Lifestyle Business
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- Stay at 20-30 customers
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- $50k-100k/month profit
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- 1-2 person operation
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- Indefinite sustainable income
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---
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## Key Financial Metrics (Month 18)
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**Revenue Metrics:**
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- MRR: $35,000 (recurring only)
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- ARR: $420,000
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- Total Revenue (with consulting): $480,000/year
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**Profitability:**
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- Gross Margin: 86%
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- Net Margin: 85%
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- Monthly Profit: $34,250
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**Efficiency:**
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- CAC Payback: <1 month
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- LTV:CAC: 33-53:1
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- Revenue per customer: $2,500-5,000
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**Growth:**
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- MRR Growth Rate: 20-30%/month (early)
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- Customer Count: 14
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- Churn Rate: <10% (target)
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---
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## Next Steps
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See `go-to-market.md` for customer acquisition strategy.
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---
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*Last Updated: December 2025*
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