How we make money here
Most employees don't actually understand your business model
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When someone joins a company I work at, I like to start with a simple yet critical question:
“Would it be helpful if I took a second to explain how we make money here?”
It seems straightforward, almost too obvious, right? But the reality is surprising: many employees go years without fully grasping the mechanics of their company’s revenue model.
They might wonder:
Wait, we we only offer annual contracts, not monthly?
Wait, the supplier pays us monthly? Not the end user?
Wait, we bundle our services in minimum quantities?
Wait, our take rate is only x%?
And these gaps in understanding can become real problems. Why? Because every decision in the company—directly or indirectly—ties back to the goal of driving revenue. Resource allocation, prioritization, and even cross-functional collaboration hinge on this foundation.
Why It Matters
When people don’t understand how the company makes money, they lack the context needed to make smarter, more aligned decisions in their roles. For instance, a product team that doesn’t know who’s paying the bills might prioritize the wrong features, while a sales team uninformed about margins might negotiate deals that hurt profitability.
How I Explain It
Here’s the framework I use to break it down:
Who Pays Us: Start with the basics: identify the customers or clients who write the checks. Are they individuals? Businesses? Middlemen?
What They Pay: Clarify the average revenue per transaction or customer, along with the factors that influence it.
When We Get Paid: Discuss the time-to-cash—whether it’s upfront, on a subscription basis, or after long sales cycles.
The Size of Our Market: Provide a high-level view of the total addressable market and where the company fits in.
Where It Could Take Us: Tie it all together by showing how the current revenue model sets the stage for future opportunities—new product lines, verticals, or geographies.
This last point—the “So What”—is crucial. It connects daily tasks to the bigger picture, helping new employees see how their roles fit into the larger strategy.
A simple explanation like this on day one goes a long way. It aligns everyone around a shared understanding of the company’s financial heartbeat and sets the foundation for more informed, impactful work.
And if you do it right, it HYPES them up to contribute to the company’s overall revenue model. I’ve had engineers say to me,
“holy shit, I work on a product that brings in $xyz million per year? That’s crazy!”
Knowledge doesn’t merely clarify what people are working on each day, it gives them agency and motivation to do great work.
Run the Numbers
Apple | Spotify | YouTube
Michiel Boere, the CFO of Remote, joined me to talk about building multinational companies and the benefits of ditching traditional budgets for better business outcomes. We touch upon:
Remote's business model and how the employer of record system allows companies to hire internationally
How he looks at unit economics in order to underwrite certain risks necessary for in growth.
Insights from his time at Uber
How budgets can lead to suboptimal decisions, such as unnecessary spending or missing out on valuable investments.
Quote I’ve Been Pondering
“Worrying is praying for something bad to happen"
-Unknown
+1 to more context == better decisions
For tech — it feels like a large subset of SWEs don’t want to think about the “dirty” work of actually running a business and just want to write code — which is maybe an acceptable trait in a megacorp but IMO totally unacceptable for a startup
I’ve also seen managers try to distance their SWEs from the business side which I also think is the wrong approach
This is a great post. While I agree that every employee should have this information, as a product manager I should at least make sure my teams have this information.