MANAGERIAL ECONOMICS (ME)

CONTINUOUS INTERNAL ASSESSMENT-3 (CIA-3)

By

Anush Johnson - 2227216

Nishok Kumar – 2227242

Sanjana A – 2227251

Sharath Kumar M – 2227252

Shreya Hiremath - 2227255

Under the Guidance of

Dr. Hemalatha R

Submitted on

11th OCTOBER 2022

MBA PROGRAMME

SCHOOL OF BUSINESS AND MANAGEMENT

CHRIST (DEEMED TO BE UNIVERSITY), BANGALORE

OCTOBER 2022
ABOUT THE COMPANY

Absorbd is the all-in-one software powered to grow your brand. It is a multivariate platform.
Each product variant focuses on a specific business problem at hand and brings forth
communities and engagement to the center of attention making client’s success their mission.
Now you can use the same underlying dynamic that built Instagram, LinkedIn, and Facebook
in your own digital business or organization.It is powered to grow your brand with a full suite
of tools designed to streamline operations, modernize processes, and eliminate engagement
challenges.

It was founded in the year 2021, headquatered in Banglore . It is a privately funded

company.it is a SAAS startup.

All-in-one software with multiple product suites designed to address specific business
problem.

a. Community Management Software

b. Membership Management Software

c. Event Management Software

d. Learning Academy Software

e. Customer Community Platforms

f. Sales Team Platform

g. D2C Platform

ABOUT THE ENTREPRENEUR

Mr.Praveen Mohan Raj the CEO and Founder, worked with Major IT companies with an
engineering background. He is specialised in cloud and data management

What is unit economics?

Unit economics describes a specific business model's revenues and costs in relation to an
individual unit. A unit refers to any basic, quantifiable item that creates value for a
business. Thus, unit economics demonstrates how much value each item—or “unit”—
generates for the business. These units are then analysed to determine how much profit or
loss they individually produce. In the case of a retail store, for instance, its unit economics
is the amount of revenue it’s able to generate every month from each single customer.

How to approach unit economics as a SaaS start-up?

Unit economics can be approached from two angles — looking at the ratio of customer
lifetime value (LTV) to customer acquisition costs (CAC), or the payback period on CAC.
IMPORTANCE OF UNIT ECONOMICS

 Get a clearer picture of their business processes

 Forecast profitability
 Develop strategies for product optimization
 Evaluate a products future potential.

BREAK EVEN POINT

The break-even point is the point at which total revenue is equal to total cost. At this point,
the profit is zero. (A particular company neither makes nor loses money at this point). There
are two types of costs to consider: variable and fixed. Fixed costs include things like rent,
lease payment, insurance payment, etc. Fixed costs do NOT depend on the number of units
(e.g. number of pizzas sold). Variable costs vary with the number of units. For example, the
more pizzas you make, the greater the food cost. Revenue will vary with the number of units.
Generally, as the number of units increases, revenue also increases.

Total revenue = price x number of units (TR = P*X). This is also known as the revenue
function.

Total cost = variable cost x number of units + total fixed cost (TC = VC*X + FC). This is
also known as the cost function.

At break-even point, TR = TC.

Types of cost
Fixed cost

Fixed costs are the costs that stay the same, regardless of other factors like production output.
Rent and insurance could be two examples of fixed costs

Variable cost

Variable costs depend on how much product is produced and sold. If you manufacture or sell
a higher quantity of your product, the variable cost will increase, and vice versa. Raw
materials and payment processing fees are two examples of variable costs.

Types of break-even calculations

You can investigate different options for your business using the break-even point. Here are
four ways to calculate a break-even point using the formula above.

 Quantity of sales: how many units will I have to sell to reach the break-even point?
 Price per unit: how will changing the sales price per unit affect my break-even point? 
 Variable costs: how will changing my variable costs per unit affect my break-even
point? 
 Fixed costs: how will changing my overall fixed costs affect my break-even point?

What is Break even point analysis?

A breakeven analysis is a calculation that tells small business owners what quantity of
product must be sold to be profitable. It helps entrepreneurs come up with a pricing strategy
that will not only cover costs but will generate a gross profit.

Importance of breakeven analysis

 Cost calculation
 Budgeting and setting targets
 Motivational tool
 Margin of safety

What can be done to achieve break even point?

  Reduce fixed costs
 Reduce variable costs
 Increase the selling price
 Improve your sales mix
 Increase the customer base

QUESTIONAIRE

1. Why did you choose entrepreneurship and what motivated you?

2. Could you elaborate on how you raised money for the business's early stages
3. Could you provide a comparison between the company's initial costs and current
revenues?
4. What has been the biggest financial risk the business has ever faced up to this point?
5. The covid era was a pretty challenging one, on the entrepreneurial point of view how
were u able to deal it and face the market.
6. How long did it take the company to turn a profit? When did the business reach the
point of break-even?
7. Did you ever think of quitting if so, what motivated you to continue?
8. How do you plan on expanding your business?
9. What was the revenue and cost at the initial time compared to now?
10. How much do you spend on marketing and have you gotten the expected results?

Learning Outcomes from The Interview

1. The interview was very productive and inspiring. We were able to comprehend the
operation of the software start-up. A software start-up is a new business that creates,
markets and provides various software goods and services.
2. Additionally, we were able to learn about the various problems they encountered
during the covid period and how they resolved them during those turbulent times.
Some of the main issues they faced are:
 They were not able to monitor or evaluate whether the employees are working
properly due to ‘work from home’.
  Relationships with many of the customers were hindered because of lack of
face-to-face communication.
 People started to hold off the project, which led to waste of time.
3. We also understood that it takes approximately 18 months to 2 years for a firm to
break even. Where in the firm has various costs over revenue when in its initial
stages.
4. Pricing strategy/plans was indeed an eye opener. The high variable cost also led them
to think of shutting down the business.

BIBLIOGRAPHY

https://absorbd.online/