How Money Works Here

Pull the Money & Deals pages together into one short, teachable story about how your business makes and manages money, for your team, a new hire, a partner, a bank or an investor.

Customer valuation (lifetime value net of acquisition cost) is strong research (Gupta, Lehmann & Stuart, 2004). Value creation versus value capture is formal strategy theory with mixed empirical support (Brandenburger & Stuart, 1996; Bowman & Ambrosini, 2000). Operating and financial leverage are standard finance concepts. Target ratios such as 3:1 LTV:CAC, a 12-month payback or 12 months of runway are rules of thumb, not research cut-offs.

Use it when:

• You run a business or a unit and want everyone to explain its economics the same way.
• You are joining a company, changing roles or onboarding someone, and need to understand how money moves there.
• You are about to talk to a bank, an investor or a partner and want the story straight before the numbers.

Skip it when:

• You have not yet worked out the numbers for one unit: start with 5.3 Unit Economics Sheet.
• Your question is a specific gap against plan: use 5.10 Budget, Forecast and Variance.

A money story pulls together pieces that rest on different kinds of evidence. The firmest piece is customer valuation research: a customer is worth the margin they bring over the whole relationship, less what it cost to win them (Gupta, Lehmann & Stuart, 2004). Beside it sits strategy theory with thinner testing: creating value and capturing it are separate, and how much you keep depends on your bargaining position, not on how hard you work (Brandenburger & Stuart, 1996; Bowman & Ambrosini, 2000). The weakest piece is the set of target ratios that travel with these metrics. Popular LTV:CAC and payback targets are practitioner rules of thumb: good for starting a discussion, risky as pass or fail grades.

Mixing the three without noticing is how a business talks itself into a fluent but wrong story. So this page keeps them apart: the flow in Step 2 shows where value leaks before it reaches you, Step 3 puts your numbers next to targets you treat as defaults to argue with, and Step 4 picks one or two levers, because pulling all of them at once teaches you nothing.

Answer each line in plain words, as you would to a new colleague. Use your own currency.

Strong answer: (illustrative numbers) "Offices pay us 95 DKK per lunch, invoiced monthly; food and delivery cost about 50; we make money once an account orders more than about 100 lunches a month." Not: "We sell high-quality catering to businesses."

Who pays us, and for what:

How much they typically pay, and how often:

Our main costs to deliver:

When we make money (the volume, price or point where it turns positive):

What must be true for this to stay healthy:

Illustrative example: the business and all numbers are made up.

The owner of an office-lunch caterer in Aarhus, Denmark, writes the money story before a meeting with her bank.

Section 1: offices pay 95 DKK per lunch, invoiced monthly. Food and packaging cost 38, delivery 12. An account turns positive at about 100 lunches a month. The model stays healthy only if routes stay full.

Section 2: of 95 DKK, 50 goes to direct costs, about 30 to kitchen rent and salaries, about 3 to interest and tax, and about 12 is left. Customers pay 30 days after month end; suppliers are paid in 14.

Section 3: one unit is an office account ordering about 150 lunches a month. Gross profit 45 per lunch, CAC 20,000 DKK (sales time and a tasting week), payback about 3 months, LTV:CAC about 6:1. Runway 4 months, against her rule-of-thumb target of 12.

Section 4: payment terms (14 days for new accounts) and volume (a second account on each existing route before a new route).

Section 5, the team version: "Every lunch earns 45 kroner before rent and wages. A half-empty van loses money. Fill the routes we have before we add new ones."