Community Revenue Formula
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A framework for evaluating the revenue potential of community-based businesses, focusing on how to calculate potential value and what makes them successful.
Core Revenue Formula
- Revenue potential = (Revenue per member) × (Total addressable members)
- Value must be directly proportional to the money members can make back
- Higher potential exists when members can generate direct revenue from membership
Key Success Characteristics
- High passion from members
- Clear ability to make money on the other side
- Works well for:
- Stock trading groups
- NFT communities
- Trading cards
- Sneaker reselling
- Doesn't work well for:
- Pure entertainment communities
- Fan communities without monetary upside
- Hobby groups with no revenue potential
Value Propositions
- Direct revenue generation for members
- Access to exclusive information
- Network effect with high-value individuals
- Two types of value:
- Direct revenue potential for members
- Network value of having high-status members (e.g., CMOs of major companies)
Scaling Considerations
- Communities don't naturally scale well
- More members can dilute value of information
- Need high-value members willing to pay premium prices
- Monthly fee must justify value (example: $33/month needs clear ROI)
- Best for:
- Lifestyle businesses
- Focused communities
- Specialized niches with clear monetary upside
Sam Parr
Host of MFM and fitness influencer
Sam Parr is a serial entrepreneur and business media pioneer.
In 2016, he founded The Hustle, a business news media company that started in his kitchen with just $12 and grew to eight figures in revenue.
Sam led the charge in making newsletters popular when few believed in their potential.
After four successful years, he sold The Hustle to HubSpot, a publicly traded company. Now operating as HubSpot Media, The Hustle reaches 3 million readers daily, employs a team of nearly 100, and has been the launchpad for dozens of its staff to found their own media companies and newsletters.
Sam remains the host of the popular business podcast, My First Million, and continues to start and sell companies. He also co-founded Hampton, a highly vetted community for entrepreneurs, founders, and CEOs, and teaches people to write better through his platform, Copy That.