Developed the Unit Economics + ROI Model to calculate value for customers; closed the biggest customer in company history
Vector
Vector is a dedicated fleet provider for document and workflow management solutions.
Developed the Unit Economics + ROI Model to calculate value for customers; closed the biggest customer in company history
Setting / Pain Point
Vector primarily focuses on the extremely saturated and capital-constrained trucking space. The market is extremely fragmented where the incumbent technologies (e.g. Trible, Synergize, McLeod, etc.) control a huge segment of the space. As companies, they have existed for decades, have a strong brand presence (and reputation, albeit not for all), and their solutions are on-premise.
Vector, as a Software-As-A-Service (SAAS) has to overcome some hurdles in the sell process:
- Capital intensive industry
- Prospect likely already has an on-premise solution
- Prospect already incurred sunk cost (may still be financing)
- Prospect is paying monthly service fees (maybe)
- Competitors offer a more comprehensive suite of relevant solutions (outside the scope of Vector)
- Prospect cannot stop operations in the transition to any other solution
- Competing solutions also have TMS which are required for our solution to be integrated
User Research (Profile)
After assessing the current customer base, I realized that a pain point for them was a lack of trust and confidence. Vector is a start-up technology that operates differently to their norm (SAAS), with little branding, and the difference of value from solution felt marginal at face-value, relative to their current program.
- Trucking (carriers) is among the most competitive markets in the US
- 75% of expenses are variable costs
- Driven by supply/demand market conditions
- Price of fuel (variable commodity)
- Price of labor (truckers)
- 25% of expenses are fixed costs
- Back-end labor (dispatch, management, Indexers, accounting, etc.)
- Technology solutions (Accounts Payable, Accounts Receivables, Treasury, Dispatch, TMS, etc.)
- Cost of Trucks (Assets)
- Prospects are under pressure to meet the legal ELD mandates (additional cost per driver)
Summary of my analysis:
- Prospects are in a capital intensive industry
- Prospects are looking for solutions that are either 1) required and/or 2) needed
- Little room in budgets for a nice-to-have solution
Goal
How does Vector position itself as a subject matter leader (as a start-up) in the space and carve value sufficient enough to make an institutionalized sell?
Strategy
Given this, I noticed that customers see the "coolness" of our technology, however, they were not well-informed of the underlying value the solution would offer. What Vector needed was a way to calculate value-unit-economics where the value points were on a per-user basis (solution is charged per user. The benefit here is that it'd be easy to visualize, understand, and scale (in terms of savings) according to how many users are implementing the technology.
- Determine problem we are fixing (see above)
- Decompose the value components of Vector
- Expound and divide by the solutions we offer (i.e. Image Capture, Rendition Billing, workflow automation, etc.)
- Complement value components with pain points
- Assign weights to each pain point
- Create value economic survey to get details from customers
- Calculate value-per-unit-economics
Wireframe
Vector Solution >> Customer Pain Point >> Metric Values
End Result
Per-User Economics
Purpose: To illustrate the current cost of the prospect's current program + introduce Vector cost + do a comparative analysis to showcase savings (value) per user.
- Cost structure to be a fee per user of solution (typical SAAS). Therefore, the unit economics should be deduced to a similar degree (per user analysis)
- The assumptions on the left-hand side allow prospects to review the data they previously shared and reinforce the results of the model
- The analysis below gets all of the structured costs (on a per user basis) to showcase the Total Cost of their Current Program
- By highlighting the Vector (per user cost), we allow prospects to see the Monthly Savings Per User (with %) -- net of cost
- This is critical in viewing and comparing cost vs. benefits in the right context
- This format also illustrates the power of linear savings
- Serves as the basis for account management in tracking progress and value provided (based on historical use rates)
The more users leveraging the solution, the more Savings and Value they generate
Annual Economics
Purpose: To illustrate the annual impact of the cost of their program based on time wasted, labor assets allocated, and expenses incurred.
- The Annual Savings Analysis uses the same assumptions (as stated above)
- The calculations include expenses and labor hours (includes the cost of such labor hours)
- Prospects, therefore, can strategize on how they wish to allocate resources (including human capital)
- Highlights the big-picture impact that the organization will benefit from
- Serves as the basis for account management in tracking progress and value provided (based on historical use rates)
Prospects can now see the value impact of the Vector solution (net of costs) and make arrangements alongside the benefits that the Vector technology provides them.
Cash-Flow Economics
Purpose: To illustrate the positive cash-flow impact eliminating Internal Days of Sales Outstanding can have over an organization
- Days of Sales Outstanding (DSO) is the days it takes an organization to receive payment of their invoice from the date of service completed
- Internal DSO is the days it takes an organization to prepare all the required information to send an invoice, from the date of service completed
- External DSO is the days it takes an organization to receive payment of invoice, from the date of invoice sent
- This is important for trucking because
- Trucking is a capital intensive business where a majority of expenses being variable
- Deliveries are in constant flux
Vector technology eliminates (or greatly reduces) internal DSO which gives organizations faster access to account receivables – improving the Operational Ratio (Cash-Flow) of the organization
Vector was now positioned to sell competitively using a framework driven by customer needs and value proposed. The customer now had a direct report of what their current optional costs looked like, what the solution would present in savings as a factor of time and money. Increased velocity of sell and also allowed Vector to go upstream to larger more enterprise-level accounts.
Customers viewed Vector as solutions partners and not a tech company selling a proposed solution.
