Scenario
You are reviewing a proposed investment credit research product for a mid-sized financial services business. The product would be sold to institutional clients on an annual subscription, but it requires upfront analyst coverage and ongoing data costs before revenue ramps. Your CFO wants to know whether the launch is worth funding and how sensitive the economics are to slower-than-expected adoption.
Financials
| Metric | Value |
|---|---|
| Annual subscription price per client | $120,000 |
| Expected clients in Year 1 | 18 |
| Expected clients in Year 2 | 30 |
| Variable service cost per client per year | $24,000 |
| Fixed launch cost | $540,000 |
| Ongoing annual fixed operating cost | $780,000 |
| Discount rate | 12% |
| Upfront implementation cost | $300,000 |
Question
Would you approve the launch based on the first two years of projected economics? What does the margin, payback, and discounted return tell you about the risk if client adoption comes in 20% below plan?
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