Day 132: The day I realised that my business idea was not scalable, yet

“Profitability is coming from productivity, efficiency, management, austerity, and the way to manage the business.” – Carlos Slim

It was week three of the Tinkerdash review and the feedback from the users was suggesting that the concept had legs.

In fact, one of the users had already asked how much it would cost to continue using Tinkerdash after their review period finishes. Was this to be the first paying customer?

“I know you are not taking customers as of yet but wondered, do you have a price of what the monthly subscription would cost as I want to factor this in? I am really considering keeping you on after I have finished this review as you have been amazing.”

Exciting as this was, Tinkerdash was not yet a scalable business. The time it took to create personalised meal plans alone would be prohibitive, and this was just one of many time-consuming tasks.

So, to try to understand where major change would be required to enable Tinkerdash to scale, I crunched some numbers. Here’s a screenshot of the first draft, based on a number of assumptions explained below:

Image

To explain year 1, it’s assumed that:

  • Tinkerdash would acquire 1000 customers each paying £5 weekly subscription fee.
  • The service would be predominantly powered by human personal assistants, each able to cater to up to 25 customers per week.
  • Tinkerdash would thus require 40 human assistants on its payroll in year 1.
  • The human personal assistants would each cost Tinkerdash around £400 per week.

Based on these figures, even without including the “other” costs such as wages and infrastructure, there would be a loss per customer of £9 each week in year 1. This was concerning.

Fast forwarding to year 3, it’s assumed the service would be more automated and each assistant would be able to cater for up to 100 customers per week. With this, plus rapid growth in user numbers, economies of scale could take effect and Tinkerdash could turn a gross profit. And quite a nice profit at that.

BUT where would the £6,000,000+ required to fund years 1 and 2 come from? Where would the 7500 human personal assistants come from to power Tinkerdash in year 3?

Clearly, there was something broken with this model and it would need to evolve to allow Tinkerdash to grow to the next stage. Challenge set. It was time to start packaging the “best bits” of Tinkerdash into something that was actually scalable!

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