Chapter 9 of 12

Detailed Methodology: Executing the Feasibility Tools

Step-by-step guide to running simulations and audits.

Playbook Chapters
What You'll Learn Step-by-step methods for revenue modeling, cost forecasting, unit economics, and tech feasibility.

Deep Dive: Revenue Model Simulation

The Revenue Simulator is your sandbox for testing how you'll make money—and what could go wrong.

Inputs and Drivers

Good models need the right inputs:

Traffic

  • Search traffic
  • Ad clicks
  • Word-of-mouth growth
  • Content reach

Conversion

  • Visitor to lead % (aim for 2-5%)
  • Lead to paying customer %
  • Free to paid % (aim for 2-5%)
  • Trial conversion rate

Revenue

  • Revenue per user
  • Average order size
  • Upsell revenue %
  • Cross-sell rates

Retention

  • Monthly churn rate
  • Win-back rate
  • Revenue retention
  • How revenue changes over time

Hybrid Revenue

If you charge subscriptions plus usage, track both:

Monthly Subscriptions

Users × Price = Monthly Revenue

Usage Fees

Users × Usage × Price per Unit = Usage Revenue

What-If Analysis

Test different scenarios:

  • Price changes: If we raise prices 20%, how much can conversion drop before revenue is flat?
  • Churn changes: If churn rises from 3% to 5%, what happens to cash flow in 24 months?
  • Ad cost changes: If ad costs double, can we still make money on new customers?

Cost Structure & Burn Rate

AI Costs

Cost Per AI Call

Cost = (Input words × Price) + (Output words × Price) + Database lookup cost

Tip: Shorten your prompts by 500 words and save thousands per month at scale.

Burn Rate & Runway

When Cash Runs Out

Know the exact date your bank account hits $0.

Safety Buffer

Keep 3 months extra for shutdown costs if needed.

Burn Efficiency

How much you burn ÷ new revenue. Target: under 2x.

Unit Economics

Customer Acquisition Cost (The Real Way)

Use Paid CAC: marketing spend ÷ customers from ads. Don't mix in free customers. Paid is what you can scale.

Customer Lifetime Value (The Cohort Way)

Track value by signup month. If customers grow over time, value keeps rising. Use a 3-year cap to stay realistic.

Technical Feasibility

Quick Technical Tests

Test What to Check Red Flag
API Limits Can dependencies handle 100 concurrent requests? Rate limits that can't scale with growth
Latency Check Does the AI response take >10 seconds? User experience failure; may need architecture change
Cost Per Query What does each AI interaction cost? Costs that exceed revenue per query

The "Bus Factor" Audit

If only one person knows the code, you're at risk. Document it and cross-train before it's a crisis.

What You Walk Away With

  • Revenue Simulation Methodology: Driver-based modeling with sensitivity analysis.
  • Cost Forecasting Framework: AI-specific cost stack and burn rate calculations.
  • Unit Economics Engine: Cohort-based LTV and Paid CAC methodologies.
  • Technical Smoke Tests: Concrete tests to validate feasibility before building.
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Works Cited & Recommended Reading
Unit Economics & Financial Modeling
SaaS Metrics & Benchmarks
  • 7. SaaS Trends 2025-2026: 25 Definitive Trends Shaping the Industry. Modall
  • 8. The Great SaaS Price Surge of 2025: A Comprehensive Breakdown. SaaStr
  • 9. SaaS gross margin explained: What it is, and why it's important. Stripe
  • 10. SaaS Gross Margin Benchmarks and How To Increase Yours. Lighter Capital
  • 11. 2025 SaaS Churn Rate: Benchmarks, Formulas and Calculator. Vena Solutions
  • 12. How to Compare CAC Benchmarks by Industry. Phoenix Strategy Group
  • 13. How I Calculate the CAC Payback Period. The SaaS CFO
  • 14. The Rule Of 40: How To Calculate And Use It For SaaS. CloudZero
Pricing Strategy & Research
  • 15. What Is A Hybrid Revenue Model? Definition, Types, Benefits. Marketplacer
  • 16. How To Use The Van Westendorp Price Sensitivity Meter. SurveyMonkey
  • 17. How To Price Your Product: Van Westendorp Pricing Model. Forbes
  • 18. Van Westendorp Price Optimization Using LimeSurvey. LimeSurvey
  • 19. Using Conjoint Analysis for Pricing Research. Qualtrics
  • 20. Understanding Conjoint Analysis in Market Research. LimeSurvey
AI Costs & Unit Economics
  • 21. AI Pricing: How Much Does AI Cost in 2025? Monetizely
  • 22. The Best Cheapest AI Inference Services of 2025. SiliconFlow
  • 23. Welcome to LLMflation - LLM inference cost is going down fast. Andreessen Horowitz
  • 24. Avoiding The Looming AI Unit Economics Crisis. Moreland Connect
  • 25. Beyond Benchmarks: The Economics of AI Inference. arXiv
Burn Rate & Cash Management
  • 26. What is burn rate? What startups need to know. Stripe
  • 27. The Bill Gurley Chronicles: VCs, Marketplaces, and Early-Stage Investing. Macro Ops
Feasibility & Risk Assessment
  • 29. AI Project Feasibility Checker. LaSoft
  • 30. Technical Feasibility Study & Risk Assessment Framework. Incurvo
  • 31. Startup feasibility: How to know if my startup idea is good. Business Model Hacking
  • 32. Startup Evaluation Checklist: Essential Investment Criteria. Qubit Capital
  • 33. What Is a Risk Matrix? [+Template]. Atlassian
  • 34. How to Run Pre-Mortem Exercises [Templates Included]. Atlassian
Regulatory & Compliance
  • 35. EU AI Act Compliance Checker. EU AI Act
  • 36. President Trump Signs EO to Stop State Regulation of AI. Ogletree
  • 37. Executive Order Limiting State Power to Regulate AI. K&L Gates
  • 38. How 2025 state legislative sessions grew the AI patchwork. Engine
  • 39. CCPA Requirements 2026: Complete Compliance Guide. Secure Privacy
Templates & Frameworks

Note: Some links may contain affiliate referrals. We only recommend resources we genuinely find valuable for startup founders.

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