After this lesson you’ll be able to:

• Use simple model maps such as SaaS, eCommerce, and Traffic-based business models
• Understand what is adding conversion funnels
• Understand advanced model maps: Marketplaces and virality
• Convert maps into variables of your model

Lesson Summary:

Using Simple Model Maps:

• We’re kicking off with how to build simple financial model maps today. The focus is on the basic types like SaaS, eCommerce, and Traffic-based models. For SaaS, think of a platform like what we use to pitch investors—key drivers would include stuff like paid marketing and organic traffic.

Adding Conversion Funnels:

• Conversion funnels are crucial for visualizing how viewers turn into buyers or subscribers. For instance, in our SaaS model, we see how paid marketing translates to site visits and then to signups, with each step defined by specific conversion rates. It’s all about predicting how potential customers move through our sales process.

Advanced Model Maps: Marketplaces and Virality:

• Now, when we jump into more complex setups like marketplaces or viral apps, the maps get a bit denser. Marketplaces might have layers like buyer-seller interactions, while virality focuses on user referrals and exponential traffic growth. These maps are a bit more intricate because they have to account for interactions that aren’t just linear.

Converting Maps into Model Variables:

• The goal is to turn these visual maps into actual variables in our financial models. Like, if we’re tracking paid marketing, we need to set variables for budget, growth rate, and how it affects signups and sales. Each piece of the map turns into a number that feeds into our bigger financial projections.

Main Techniques and Strategies:

• A big takeaway today is not to overcomplicate things. Yes, we can get super detailed with different traffic sources or user actions, but it's vital to keep our model manageable. The more complex the map, the more data points we need to maintain, which can get overwhelming.

Practical Tips:

• Remember, every part of your model should have a clear purpose and directly tie back to your business activities. Don’t add stuff just because you can—make sure it has a real impact on understanding your financials. When setting up these models, use historical data to make your future projections more accurate.

Model Building Blocks on Miro: