Attractive, win, economics: what it is and what to do instead

The idea worth keeping

Not as boxes to fill, but as questions that fall out of the maths of the goal:

• How does a business like this make money in the new market?
• What would we need to believe about volume, price and cost for it to pay?
• Why would customers switch to us from what they use today?

Why reaching for it fails in an interview

• It is generic. Attractive, win, economics opens every entry case the same way.
• It misses the driver that matters. In payments, the deciding question is whether small shops will switch from their bank, which the buckets do not point to.
• It sounds rehearsed. Interviewers hear these three buckets often, and they read as a template.

What to do instead: a worked case

1. 1

   Pin the question

   Decide whether we can win enough small shops to earn a profit within five years.

2. 2

   Write the maths of the goal

   • Revenue = shops signed x card payments per shop per year x net take rate
   • Profit = revenue minus cost to serve shops minus cost to win them
3. 3

   Use what you know about the business

   • In card payments, the net take rate after card scheme and bank fees is thin, so volume per shop and how long shops stay decide profit.
   • Small shops often get card machines from their bank, bundled with their account, so switching is the hard part.
   • Shops switch for lower fees, faster payout of their money and simple setup.

   The structure that falls out of it

   • Shops we can win
     • Small shops taking cards today
     • Why they would switch from their bank
   • Revenue per shop
     • Card payments per shop
     • Net take rate
   • Cost
     • Machine and sales cost per shop won
     • Cost to serve each year

   Hypothesis: The economics work if we can sign enough shops, so the deciding fact is whether shops will leave their bank for us.

4. 4

   Find the facts that decide it

   • Target in year five: 50,000 shops with 200,000 of card payments each = 10 billion a year. At a net take rate of 0.5%, revenue is 50 million.
   • Serving costs 30 million a year, so profit is 20 million a year once the base is built, after a one-off 15 million to win the shops (300 each).
   • In a survey of 400 local shop owners, 30% said they would switch for payout the next day; the country has 400,000 small shops taking cards, so 50,000 is about 13%.
5. 5

   Say so what

   Enter, with next-day payout as the reason to switch: the business earns about 20 million a year if it signs 50,000 shops, about 13% of the market, and a third of owners say faster payout would make them switch. Start in two cities to test the sign-up rate. The main risk is banks cutting their own fees in response.

Build the acumen behind it

The worked case used two things a list cannot give you: the five moves, and knowing how this kind of business makes money. These pages teach both.