How Much Will You Charge (and Why)?

The purpose here is to establish how much money LambdaHow should charge each customer and to justify this figure with some analysis. This initial analysis will be based on the number of people employed by LambdaHow over time and what their salaries are; the company’s day-to-day and long-term operating costs; and the cost of curriculum materials used for the site’s content. These factors will allow an accurate summary of what yearly budget is necessary for LambdaHow, which will allow an extrapolation of how much to charge each customer based on estimates for the size of the customer base. Notably however, this analysis does not include a true in-depth market analysis to estimate how many customers will engage with LambdaHow at each possible price point. This market analysis will instead come later.

Within the first two years of launching, LambdaHow will have three full-time employees: Full-Stack Developer, Curriculum Designer, and Founder (developer & designer). The salaries of these three positions total $250,000 per year. LambdaHow’s typical operating costs will be very minimal due to maintaining a small team, having employees work from home (no office), and needing practically no physical materials or content licensing. All the company’s curriculum will be developed in-house based on the current knowledge in the computer science field. With a small buffer of $10,000 for miscellaneous operating costs such as website hosting, the annual budget is $260,000 per year.

To reach $260,000 in annual income, LambdaHow will need to balance the following equation: $260,000= <annual customer count>*<annual $ per customer>. An in-depth market analysis will be saved for later but with an estimate of about 2200 customers annually, LambdaHow should charge each customer about $120 annually.