1. General Business
Principles: Economics
- Part 1
Warren Leow

2. Why is Economics important
for startups?
Microeconomics
Macroeconomics
Prioritisation & allocation
of resources to optimise
for returns and work around
competition, costs, constraints
Preempt and react against macro
factors beyond control which might
affect your startup
As competition increases, startups need
to be more scientific and data driven

3. What do founders need to
understand?
• Allocation of scarce resources to achieve
objectives via microeconomics
• Clarity on business tactics:
• Revenue maximisation
• Cost minimisation
• Profit maximisation
• Cash maximisation
• Impact maximisation
If you can’t count, you should not be in
business, because you will definitely fail

4. 1. Are you able to cover your fixed
costs? Can you make money?
2. What does marginal and average
costing and pricing mean?
3. How to balance opportunity cost
using Pareto analysis?
Key Questions for Today
Laptop required: Working examples

5. What is your Total Cost? Illustrative
Examples only

6. Are you making money? Illustrative
Examples only

7. Breakeven is key
Breakeven
Illustrative
Examples only

8. Marginal Cost drives
Average Variable Cost Illustrative
Examples only

9. Marginal Revenue drives
Average Revenue Illustrative
Examples only

10. Continue investing when
MR > MC Illustrative
Examples only

11. Profit maximisation: Marginal
Revenue = Marginal Cost Illustrative
Examples only

12. Lets try some practical
examples

13. Lets try to tie back to
earlier concepts
• What is Marginal Revenue? Marginal CLTV
• What is Marginal Cost? Marginal CAC
If your CLTV > CAC, keep investing.. but..
Only if your resources do not
have better competing uses

14. How to balance opportunity
cost?
• Use Pareto Analysis to focus on 80/20 or
optimised risk to reward ratio
• Rank all pricing and problem solving strategies
in descending order by returns (value) and
(effort) cost
• Merchants
• Customers
• Product line, SKUs
• Complaints
• You must measure, rank and then prioritise to
be efficient in resource allocation

15. How to balance opportunity
cost?

16. Key Takeaways
• Total Cost = Total
Variable Cost + Total
Fixed Cost
• Total Profit = Total
Revenue – Total Cost
• Average Revenue >
Average Cost = Profit
ACTION: Download MAP Economics
Model v2 and play with it
• Marginal Revenue >
Marginal Cost = Sell
& Market More!
• Marginal Revenue =
Marginal Cost =
Maximum Profit
• Prioritise with
Pareto analysis

17. Next lessons for
General Business Principles
• Part 0: Sensitivities Analysis
• Part I: Basic Microeconomics
• Part II: Supply and Demand Curves
• Part III: Critical Path Analysis & Decision Trees
• Part IV: Competitor Analysis
You might be able to build product,
but if you can’t scale scientifically,
you cannot grow big