During my time as CTO of Innowell I became prominently involved in the creation and ideation of the pricing modelling for how we charge organisations to use our software
When I create a pricing model for a technology business, I like to approach it from two angles; what features in the software are needed versus wanted each customer, and what is the opportunity cost of the customer not solving implementing the software to solve the pre-existing problem
That last one around opportunity cost seems to not come naturally to a lot of people so I thought I'd walk through an example for how to do a quick back of the napkin opportunity cost model.
The model I've chosen is to calculate the opportunity cost of a prominent university in Melbourne, Australia of not investing in proactive, preventative mental care solutions and support
HESA (Higher Education Statistics Agency, UK) found dropouts between 2009 and 2014 rose by 210% and University student requesting counselling services rose 28% between 2013 and 2016
As of this year University of Melbourne completion rates are sitting at 88% (best in Australia!). On average, 24% of University dropouts have mental health issues which may contribute to the decision and as of 2016, university of Melbourne had 48k students enrolled in university courses. Therefore with an 88% completion rate means 5.7k students drop out each year from University of Melbourne
The average annual fee for a university student in 2014 was $26k for a full year of study meaning the opportunity cost for the university at current completion rates is $148 million per year. Of that number, $24 million of student fees have had mental issues at the time of the decision to drop out
Conservatively you could say 50% of the mental-health related dropouts could have been prevented, therefore the implementation of preventative mental health services in the University of Melbourne could net an additional $12m revenue per year