Economics, Pricing & Unit Economics

Kaern Schools — Course for Founders

Tutor: Fin

Track: Business Fundamentals → Commercial Mastery

Welcome to the room

Pull up a chair. I'm Fin, and for the next six modules I'm going to be the slightly-annoying voice in your head that asks "yes, but does the math actually work?" every time you fall in love with an idea.

This course is for founders running Kaern startups — people who have a product (or a strong idea of one) and now have to turn it into a business that doesn't quietly bleed money. We'll use real numbers from the cycleX world the whole way through: cycleWASH bicycle-washing machines (a physical, high-capital product), the cycleWASH subscription (recurring maintenance and consumables), and cyclecnc (high-ticket, low-volume B2B CNC machinery sold to industrial buyers). Three very different shapes of business, one shared spreadsheet of truth.

Who this is for

• Founders who can describe their product but freeze when an investor asks "what's your CAC payback?"
• Operators who set prices by copying a competitor and hoping.
• Anyone who's heard "unit economics" in a pitch meeting and nodded without knowing what it meant.

What you'll walk out with (outcomes)

1. Read a demand curve and find a customer's willingness to pay without guessing.
2. Separate fixed from variable costs and know your break-even cold.
3. Choose a pricing model (value-based, tiered, subscription) on purpose, not by accident.
4. Calculate CAC, LTV, payback, and contribution margin for your own startup.
5. Design a price experiment that produces an answer you can trust.
6. Predict how competitors will react when you move your price — before you move it.

How I teach

Short scripts, then we get our hands dirty. Every lesson ends with a question because economics isn't a spectator sport — you learn it by deciding. Let's go.

Module 1 — Supply, Demand & Willingness to Pay

Learning objectives

• Explain supply and demand as curves, not slogans, and read where they cross.
• Define willingness to pay (WTP) and distinguish it from price and cost.
• Identify the consumer surplus you leave on the table by mispricing.
• Use customer interviews and observed behavior to estimate WTP for a real product.

Lesson 1.1 — The market is a conversation, not a price tag

Teaching script (Fin's voice): Here's the thing most founders get backwards: you don't set the price, you discover it. Imagine a noisy marketplace. On one side, buyers each carry a secret number in their head — the most they'd pay before they walk away. That's willingness to pay. On the other side, you carry a number too — the least you'd accept before it's not worth making. Demand is just all those buyer-numbers lined up from highest to lowest. Supply is all the seller-numbers lined up from lowest to highest. Where the two lines meet, a deal happens.

Now, cycleWASH. A bike-rental company in Amsterdam would pay €18,000 for a washing machine because it saves them three staff-hours a day. A small repair shop maybe €6,000. A hobbyist? €400. Those are points on the same demand curve. If you price at €9,000, you win the rental company and the mid-market, lose the hobbyist, and — crucially — the rental company is quietly delighted, because they'd have paid double. That gap is money you didn't capture.

Demand isn't one number. It's a slope. Your job is to find where on that slope your price should sit. So: when you last set a price, did you draw the curve — or just pick a number that felt safe?

Lesson 1.2 — Willingness to pay is a feeling you can measure

Teaching script (Fin's voice): "Willingness to pay" sounds like mind-reading, but it leaves fingerprints everywhere. Think of WTP like the depth of water — you can't see the bottom, but you can drop a line and feel for it. Three honest probes: what do they pay today for the alternative (including the pain of doing nothing)? What's the value to them in money — hours saved, revenue gained, risk avoided? And what makes them flinch — at which price does the conversation change tone?

For cyclecnc, a B2B buyer's WTP is almost pure ROI math. If our CNC machine lets a workshop produce 200 extra parts a month at €40 margin each, that's €8,000/month of value. Their WTP for the machine is anchored to how fast that pays back, not to what the metal costs us. A founder who quotes "cost plus 30%" here is leaving a fortune on the floor — the buyer would have paid for the outcome, not the object.

The trap is asking customers directly "what would you pay?" People lie — not maliciously, they just don't know. Watch what they do, anchor to alternatives, and frame in their economics. So here's my question: for your product, what is the single number — in your customer's currency, not yours — that your product moves?

Worked example — Reading a demand curve for cycleWASH

We survey 100 potential buyers and record the highest price each would pay:

| Price (€) | Buyers willing at this price (cumulative) | |-----------|--------------------------------------------| | 4,000 | 90 | | 7,000 | 60 | | 9,000 | 40 | | 12,000 | 22 | | 15,000 | 10 |

Revenue at each price = price × buyers:

• €4,000 × 90 = €360,000
• €7,000 × 60 = €420,000
• €9,000 × 40 = €360,000
• €12,000 × 22 = €264,000
• €15,000 × 10 = €150,000

Revenue-maximizing price is €7,000 (€420,000). Note: the highest price (€15,000) makes the least money. The curve, not the ego, decides.

Hands-on exercise Take your own product. List five plausible prices. For each, estimate (honestly) how many of 100 target customers would buy. Build the table above, compute revenue, and circle the revenue-maximizing point. Then write one sentence on why the curve bends where it does — what changes in the buyer's head between two adjacent rows?

Common mistakes

1. Treating WTP as one number. It's a distribution across segments; a rental fleet and a hobbyist are not the same buyer.
2. Asking customers their WTP directly. Stated WTP is fiction; infer it from alternatives and behavior.
3. Confusing your cost with their value. Cost sets your floor, never their ceiling.

Check for understanding

1. Why can a higher price produce lower total revenue? Use the table to explain.
2. What is consumer surplus, and why is the Amsterdam rental company's surplus a warning sign about your pricing?
3. Name two behavioral signals (not survey answers) you'd use to estimate WTP for your product.