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Most failures are caused by the business model, not the idea: nobody pays enough, it costs too much to deliver, or customers are too costly to win. Stress-test it before you raise capital.
1. Pick your revenue model
| Model | Typical for | Key risk |
|---|---|---|
| Subscription / SaaS | Software, data, memberships | Churn and customer acquisition cost |
| Transaction / marketplace fee | Marketplaces, payments, booking platforms | Chicken-and-egg growth; disintermediation |
| Product sales | Consumer goods, hardware, materials, food | Gross margin, inventory, returns, commodity prices |
| Services / projects | Agencies, trades, clinics, consulting, engineering | Hard to scale; utilization; key-person risk |
| Licensing / royalties | IP-led businesses, technology owners | Needs proven references |
| Usage / gate fee | Infrastructure, logistics, waste and water services | Volume risk and contract length |
| Advertising / data | Media, consumer apps | Scale needed; platform dependence |
Many fundable models blend two or three streams.
2. Test the five make-or-break questions
- Customer: Who pays, how much, how often? Do you have proof (paid pilots, pre-orders, LOIs, signed contracts)?
- Value: Is your offer ten times better, or just slightly different? Why switch?
- Economics: Does each sale make money after delivery and acquisition cost?
- Delivery: Can you deliver reliably at 10 times today’s volume? What breaks first?
- Defensibility and risk: What stops a competitor from copying you? What rules, permits or licences apply?
3. Build unit economics
- Revenue per unit (customer, order, tonne, patient visit, seat, project).
- Direct cost per unit and gross margin.
- Customer acquisition cost (CAC), lifetime value (LTV) and payback period.
- Break-even volume and cash conversion cycle.
- Sensitivities: price ±20%, volume ±30%, cost ±25%, conversion ±30%.
4. One-page canvas
Customers & problem
Who they are, the pain, how they cope today.
Offer & value
What you sell, the outcome delivered, why it is better.
Channels & sales
How customers find, try and buy; sales cycle length.
Revenue & costs
Pricing, margin, fixed and variable costs, cash needs.
Partners & resources
Suppliers, distributors, technology, people, licences.
Risks & moat
Competition, regulation, dependency, IP, switching costs.
Sector spotlight: cleantech and waste. Test feedstock supply, offtake for your outputs, technology readiness, subsidy dependence and permitting before anything else. Profitability that only exists with credits or grants is a red flag for investors.
Red flags investors see: no evidence anyone will pay, margins that disappear when you scale, one customer or supplier dominating revenue, and no plan for rules and licences.