The CEO of a startup that I worked with came to me with a problem. His company had created an innovative software solution using AI technology, which could improve productivity and reduce costs for large manufacturing companies. However, since the startup was still new and not well-known in the market, it was hard to convince potential customers to try the solution or see its value. The CEO was struggling to effectively communicate the benefits of the solution to potential customers in a way that they could understand and evaluate.
After assessing these challenges, we recognized the necessity of a tool that provides decision-makers with a clear understanding of the potential advantages of the startup's solution: cost reductions, enhanced efficiency, and other performance metrics that were relevant to customers' business needs. In short, we looked for a Value Calculator.
We followed the following guidelines to create a Value Calculator:
- Use a concise set of parameters/drivers to capture the core business "building blocks."
- Prioritize simplicity and user-friendliness for easy navigation by salespersons and customer decision-makers.
- Incorporate modularity and scenario-driven functionality to enhance versatility.
- Ensure that the output is quantifiable and indicative of the value proposition.
To illustrate, Exhibit I showcases the Valuation Calculator, featuring a simple input side with five primary parameters that influence the value, including the number of compressors, cost per Kwh, average capacity on Kwh, and working hours per day and per week. Each parameter features a dropdown menu for selecting the relevant parameter, enabling the tool to become dynamic and scenario-driven.
Exhibit II displays the Value Calculator, which demonstrates the input and output data. It highlights two key outputs that are of particular interest to our customers: the quantified monetary impact and the quantified CO2 reduction in tons. The intelligence behind this tool lies in the complex calculations on the backend that translate the input data into these valuable outputs. For instance, if we consider the example of 6 air compressors that work 16 hours a day, 6 days a week, with an average of 1000 Kwh each, the tool can convert this input data into an annual energy cost saving of $136,000 for the plant, based on the current market rate of $0.12 per Kw.
Having a clear and measurable value proposition has proven to be a game-changer in boosting sales efficiency by increasing the conversion rate from "lead to deal," making it easier to acquire new customers. Moreover, the Value Calculator has provided a clear benchmark for assessing the success of our startup's solution, allowing us to determine if quantified promises were met.
The Value Calculator was a crucial tool that contributed significantly to the startup's growth and expansion by improving sales communication and increasing sales efficiencies. Its implementation generated credibility and legitimacy in the new market, while the clear ROI demonstrated a strategic and data-driven approach to product development and marketing. The Value Calculator also supported the "Product-Market-Fit" aspect of the startup's Equity Story, increasing its credibility and legitimacy in the eyes of investors.
I highly recommend incorporating it into any startup's operational and strategic arsenals.
