Marginal Revenue

Marginal revenue is the revenue for each additional unit sold.

The additional unit comes with a marginal cost which is the additional cost on that unit.

As the startup scales costs will rise and at some point, the marginal cost per unit will increase.

Startups should raise their prices as they grow so the marginal revenue stays ahead of the marginal cost.

By adding more features to the software platform or expanding the product to have more benefits, the product should command a higher price.

You calculate marginal revenue by taking the change in revenue divided by the change in quantity.

Change in revenue is calculated by taking the total revenue and subtracting the last unit sale revenue.

Marginal revenue and marginal cost are good indicators for predicting the direction of profit.

For startups, this helps determine your cash runway.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.