Revenue Models: The Hidden Operating System of Your Venture

Damns Given Episode 2.15:

"What is one way you can become more knowledgeable about the business case for whatever you're selling? One notch more knowledgeable. The more we think about these economic tools as mechanisms for value delivery, the more we get into the loamy soil of trust — which is where all the good things grow."

It's common for leaders to think their biggest strategic decisions happen in leadership meetings. They don't. They happen in the revenue model—the underlying structure of how money flows through a business—and most ventures have never seriously looked at theirs.

Nick Richtsmeier opens this episode with two client stories that have no business being in the same conversation. A solopreneur content marketer working from home in Idaho. A SaaS company with 25 employees and an engineering arm in India. Completely different scale, completely different problems... except they share the same root cause. 

Neither of them understands the business case for what they're selling into, and because of that, both of them keep making the same decisions over and over, wondering why nothing sticks.

Nick breaks down how revenue defines a structure for decisioning, even when  and especially when you don't attend to it. It's why most specialists — content marketers, HR consultants, compliance experts, operations people — have built their entire practices without ever learning to speak the language of the businesses they're selling to. 

He walks through the death of per-seat SaaS pricing and what's replacing, and he makes the case that learning to read a P&L is one of the highest-leverage things a non-financial specialist can do right now.

The subscription addiction era — build a thing, get as many subscribers as possible, extract maximum value before anyone notices — is over. What comes next requires something the extraction economy never asked of anyone: genuine understanding of the financial reality of the person on the other side of the table.

**Chapters **

00:00 Two Case Studies
10:03 The Importance of Financial Leadership
14:27 Your Takeaway Question

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Transcript

Two Case Studies, Same Revenue Problem

SPEAKER_00 0:00

I'm Nick Richmeyer, and this is Dams Given, a podcast where we explore how to free your venture from the extraction economy, realigning it to the timeless ways that humans build, collaborate, and buy. Okay, we're gonna start today by looking at two extreme examples of businesses that I know. Now they're a little muddy to protect the innocent, but two extreme examples of businesses that I know that are are like completely different, but have the exact same problem. And what's happening as they resolve the problem. Now I want we're looking we're gonna look at these through the lens of maybe a concept that may be familiar to you, unfamiliar to revenue model. And the reason why that matters is because how the money flows makes all the decisions that you don't make overtly. So every business is making a few decisions overtly, like the ones that are happening in the leadership meeting, we're gonna do this, and then we're gonna do this, and then we're gonna do this. Oftentimes those big decisions are hitting resistance and they don't actually hold, and then you have to go remake them again, right? So if you sit in a leadership team meeting, if any of you have ever been in a C-suite, many of you, of course, have, and you've like experienced these things, you're like, why do we keep making this decision over and over again? This decision about who should lead this team or how we should handle remote work or what we're in, like you find that these decisions end up on latherince repeat. And then you bring in a system like traction or something to try and solve for that. And and those things are all well and good, but the reality is what's happening is there's all of these underlying decisions that are basically running your business for you that you may or may not agree with until you start addressing those decisions. And a lot of that has to do with revenue, because where the money goes makes the decisions unless you change it. So getting back to our two examples. One is solopreneur example, somebody who works in content marketing, uh, sells some form of content marketing, provides a service in that front. It might be SEO, it might be writing, it might be a variety of different things. And often that person, and I've seen many examples of this, is complaining about the fact that they're constantly being held to account for ROI, the big cuss word of content marketing. ROI, ROI, ROI. Um, and and everybody's very worried about it. And how can I possibly defend the ROI of this and the ROI of that? And then they bait what happened for like a decade is they bought a bunch of expensive software systems that says we will help you defend for ROI, and then they made up a bunch of lies. We like to call them the HubSpot lies, to convince the world that you could say this blog sold this client, and therefore this blog was worthy of existence in the world. All of that was a lie, and now here we are. So that content marketer is living with this challenge of I'm trying to sell a thing that I know is valuable if done in the right way, delivered in the right way, done, you know, they've done all their work understanding AI agents and how to sell and get GEO surface and all that kind of stuff, but they really don't know how to solve for why someone should pay them X amount of dollars. And the fundamental problem there, which we'll talk about a little bit in great detail after we talk about our other example. The fundamental problem there is almost always that provider, that person, doesn't understand the revenue structure of the business they're selling into. Talk a little bit about what revenue structure means in just a second, but that is so chronic, right? That you have a specialty, you know how to do a thing, you know how to build an HR program, or you know how to help people with compliance, or you know how to do a content marketing thing, you have a valuable service that pro that solves for some sort of slice of business operations. And of course, you know by definition that as soon as you're in a slice of business operations, you're impacted by all the silly crap that comes from all the other slices and chaos ensues. But guess what? Specialization matters, and so you solve for this slice. And in most cases, people who have built an expertise on a slice of the business, unless that slice is finance, don't know how to talk about finance. And this is a huge problem. Particularly as we move into this environment where doing stuff, doing shit, getting through execution is less and less perceived value. Now, the reality is there's a lot of execution that needs to get done, and we need a lot of humans to do it because there's a lot of AI agent chaos out there in the water. But perception-wise, the execution is perceived to be of lower value, and there's price compression. So our friend, the content marketer, just simply is not in a place to validate their offering because they don't understand what they're selling into and they don't have any hobspot lies to defend their ROI. And what do they do? Okay, case number one. Case number two, SaaS firm, software company. Cool software company, solves a problem, provides some sort of meaningful tooling for um B2B clients, right? Maybe it's business intelligence, or it's some sort of automation, or it's some sort of visibility into their HR systems, or it's connectivity between their content and their CRM, or any number of like, right, all the many billions of widgets that the SaaS system has cooked up over the world. And for a period of time, you could sell that thing out into the world, and you kind of got to just sort of pick your price. Like, like, I think we're $119 a seat, right? And if you have 10 people, then it's 119 times 10. And you're right, it was just a matter of doing some math. Um and pricing was literally a function of what you what you could get away with in a lot of ways, sort of the Salesforce model. Um, and if you could get away with a lot, then you charged a lot. And if you couldn't get away with much, then you did a lot of discounting and custom arrangements and whatever. Um we're not gonna sort of break down that whole system in detail. The what we all know though is that the system is like firmly in the rearview mirror. And so this nice, well-meaning, value, still valuable SaaS program, it's not one of those things that, like, well, A, I kind of wiped it out. Like, people still need it. They have a problem because they've been selling into a thing without needing to think at all about the business case for what they're selling into. So you have two very different businesses. One that's got 25, 30 employees and an entire arm of engineers in India, and like that, one that's got a really robust corporate infrastructure, one that's a really nice single person in their house in Idaho doing a thing, right? And both of them face the same fundamental problem that they don't know the business case for what they're selling into because they don't they don't have a system, a way of understanding revenue structure. And my case for you today is that this is really, really important, and that both of these organizations, for completely different reasons, need almost the exact same thing, which is a way of thinking about structuring revenue and what the options are and how to and what those options then mean for their downstream operations. Because how you organize revenue makes all these decisions for you. So if the software company decides to stay a per seat SaaS company, and some of this is about pricing, but it's not just about pricing. If they stay a per seat SaaS company, that has enormous implications for how they sell. And in one of these examples, a client of mine, we worked through this and we actually broke them of the per seat pricing model. We built a different model that was deeply tied to what was important to their customer. Well, to get to what was important to their customer, we actually had to break the whole offering and had to build an offering, a pre-sort of offer offer, that got them visibility into the business case. So, can you imagine a software company that says, hey, before I even want to sell you the software, I want to have an engagement with you to understand do you even need this and what's the financial impact to your firm of working together? And they're getting enormously positive results, right? Because people like, aren't you just gonna tell me that it's half a million dollars a year and I have to just suck it up and push it through book procurement? No, actually, we're not gonna do that. We're not gonna put you on a free trial and blah, blah, blah, blah, blah. We're gonna invite you into a discussion around what is the business case for this? What do you actually need? How much of this do you actually need all these seats? Right, what do you actually need and how does it apply to the revenue work that you're trying to do? And surprise, surprise, different businesses need different versions of their software and different out revenue models need different versions, right? So as soon as you start thinking about a revenue model, then all of a sudden now you gotta think, now we get to think about offering in a way that is more client-centric. We get to think about pricing in a way that's more client-centric. And beauty of beauty is for those of you who live in the marketing world, we get to market in a more humanist way, right? We're not just spinning up a bunch of ads and a bunch of you know, LinkedIn landing pages and crap to just get people's eyeballs on you. We're not playing the attention economy game. What we're doing is building a growth model that works for the revenue model. And surprisingly, that's a much simpler thing to do than just classic demand

The Importance of Financial Leadership

SPEAKER_00 10:03

gen marketing or whatever you want to call that crap that's that has, again, also fallen out of favor. Um, so in that now, let's think about it from the consultant point of view. This content marketing consultant's not ever going to become a financial expert. That's fine. But he should learn how to read a PL. If you don't know how to read a PL, you need to learn how to run a read a PL. This is something that we talk about in the guild. I provide some training around it in the guild, how to read a PL, how to think about these basic financial things. Because a lot of consultants who provide non-financial services don't know how to think about it in financial terms. And the second you can talk about money, you are more valuable. These are economic things that we're doing. And if you can talk about money, if you can talk about margin, if you can talk about cost of goods sold, if you can talk about overhead, if you can talk about unit pricing versus bulk price, if you can talk about these things, you have power in the negotiation and you also have power to get better stuff done. Um, because a lot of times, one of the reasons, and I hate to say this, but one of the reasons for the content marketing backlash, for example, is because a lot of it didn't have anything to do with the business operation. It was a game to be played to feed the online platforms because the online platforms told you you had to do it. And they controlled the media airways, and so they got everybody to do this thing that felt right, and so we made a bunch of blogs and videos and social media posts and whatever because everybody was saying that's what we had to do. No one could tie it to revenue, no one could tie it to the business case, except in very, very deeply uh analytical organizations and that knew how to do this well. But for the most part, it was just a mass adoption of an extraction tool so the platforms could control your revenue model. Well, guess what? If you're a consultant that knows how to break that and free people from that, because again, the founders who are listening, you guys know, because I talk to you guys all the time, you guys know you don't want to do this anymore. You don't want to play by these games anymore. You kind of feel like you have to, and you're waiting for somebody in the business development side, the sales side, the marketing side to raise their hand and go, hey, guess what? We have tools, so you don't have to do this anymore. You're waiting for those people to raise their hands, but you don't know where you know how to find them, right? So everybody wants to get out of that extraction game and into an expansive game where we're actually controlling our own futures. And the way to do that, or one, I should say, one critical way to do that, is to think really intelligently about the model for revenue. Not just pricing and how you price for things, but what that means for production, what that means for how you manage costs, what that means for how you build teams, what that means for how you market and the scale of how many clients you need to take on and retention and the back end and all that kind of stuff is so powerful. And we're thankfully oozing out of a world where everything is just 10x subscription. Just build a thing, have a base cost, get as many subscribers to it as you can that don't actually cost you any money every time somebody subscribes and extract as much value out of the marketplace as you possibly can before somebody goes, Do we actually need this? Right? We're at we're done with that. And now we get back to a beautiful world where it's like, well, there's this way of doing revenue, and there's this way of doing revenue, and this other way of doing revenue. And businesses get to be smarter, more focused, more engaged in their place and in that with their people and with their specific offering. And consultants who can speak that language from your unique strength area, again, content, payroll, operations, people who can speak that language have more to bring to the table. Businesses who are organized in a way where you build a revenue model that's really designed for value delivery have an advantage because you immediately differentiate in the marketplace. So if you have further questions about this, if you're like, oh, this kind of sounds interesting, but I'm not exactly even sure what next talking about or anything in between. Um, we are doing a just a one-time kind of deep dive on revenue models within the guild. Um, you actually don't have to be a guild member for this one. Occasionally we do some trainings that are for the world. So the link will be in the show notes. Um, it's a little bit too long for me to rattle off, so you'll have to just grab it in the show notes. The link will be in the show notes, but you are welcome to join us for that. It's here at the end of the month, I think on Tuesday, uh the last Tuesday of May. Um so take a look at that in the show notes.

Your Takeaway Question

SPEAKER_00 14:27

And I hope to see a ton of you there. As we log off uh from this episode, I just want you to walk away with one thing. What is one way that you can become more knowledgeable about the business case for whatever you're doing, whatever you're selling? Just one notch more knowledgeable. Is it a better question you could ask in the discovery process? Is it a way of should you narrow your field of clients so that you are working with people who have similar business cases? Is it you need to learn how to read a PL and you need to take a class on that? Is it um you need to think about, oh wait, I've been caught up in the subscription addiction and I don't need to do that anymore, right? But think about one way that you can become more aware of how to think about revenue and and financial modeling in a way that puts you one step closer to the people that who who you're trying to help, whoever that is, right? And the more we do that, the more we think about these business tools, these economic tools as mechanisms for value delivery, the more we get into sort of the the loamy soil of trust, which is where all the good things grow. This has been Dams Given. Please like, subscribe, and follow wherever you find this channel and at Damsgiven.com. And always send us your questions and feedback at podcast at culturecraft.com. Everything you've heard today is part of Trustmade Growth, my ecology at CultureCraft to help ventures escape the extraction economy and realign them to the ways we naturally build, collaborate, and buy. You can learn more. You can find a strategist, you can become a strategist, and join the community at trustmadegrowth.com.