What a discovery pass costs to launch, and what its revenue depends on

What a launch costs

A discovery pass costs the platform, payment fees, the illustration, printing, promotion, professional advice and your time. The time spent signing businesses is the biggest cost.

Two costs are missing from that table because you will not have them: an app to build, since the pass lives in Apple Wallet and Google Wallet, and hardware for the businesses, which redeem offers on a phone or a computer. The QR codes for printed cards are delivered as files, so only the printing is left to pay for.

The biggest cost is the last one. Signing twenty or so businesses takes a lot of visits, and nobody can make them for you. The method is in question 7 of the guide.

What the revenue depends on

A discovery pass’s revenue depends on its price, the number of passes sold, any payout to businesses, the reseller commission and the platform.

Money comes in through one door: pass sales. Your gross sales are the price of the pass, which you set, times the number of passes sold, which you will only know after launch.

Up to three amounts then come out of each sale:

• a payout to participating businesses, if you plan one, which is entirely optional;
• the reseller commission, on passes sold at a business’s counter, if you pay one;
• the platform and payment fees. With Arsom Pass, the platform is an annual subscription and a small commission per paid pass sold, by quote.

The first two come from agreements you make with your businesses. What is left pays for the illustration, printing, promotion, professional advice and your time. Tax collected at checkout is not revenue, since you remit it.

What drives the result

Five levers drive a discovery pass’s result: the price, the share sold by resellers, the payout to businesses, the number of passes sold and the fixed part of the platform, which takes a bigger bite when volume is low.

The price of the pass

A higher price raises what each sale brings in, but it can cut the number of buyers. The price holds as long as buyers can see from the list of offers that they will make it back in a few outings. The 20-question guide covers how to set it.

The share sold by resellers

A pass sold online costs no reseller commission. A pass sold at the counter does, if you pay one. In return, a reseller business reaches customers who don’t follow you. The commission is what that reach costs, and you can also choose not to pay one.

The payout to businesses

A payout can make the first businesses easier to sign, especially those whose offer is expensive. Without one, your argument is the exposure you bring them, which comes down to the size of your audience. Write the rule down before you sign the first business: changing it mid-year is hard to explain.

The number of passes sold

If you already have a local audience, you start ahead: see monetize a local audience with a discovery pass.

The fixed part of the platform

The subscription is a fixed yearly cost that doesn’t shrink when you sell less, so it takes a bigger bite out of each pass when volume is low. Ask every vendor which part is fixed and which part moves with sales.

Estimate your break-even with your own numbers

To estimate your break-even, divide your launch expenses and the fixed part of the platform by what’s left on each pass after any payout, the reseller commission, the platform commission and payment fees.

Before you launch, run a simple calculation with your own numbers. Add up your launch expenses and the fixed part of the platform. Then take out of the pass price what goes out with each sale: any payout, the reseller commission when the pass is sold at a counter, the platform commission and payment fees. Divide your expenses by what is left: that is how many passes you need to sell to cover your costs.

Run it with a conservative volume, then with a more ambitious one. If you only break even in the second case, rethink the price, the payout or the number of businesses before you promise anything.

What the calculation leaves out

The calculation leaves out how many passes you’ll sell, your time and refunds. Nobody knows the first one in advance.

How many passes you will sell. Nobody can tell you in advance, and Arsom Pass has no measured results yet: a first network is being set up.

Your time. If you launch alone, what is left after expenses is also your pay.

Refunds. The calculation assumes no pass is refunded, and the rules on refunds and on the expiry date of a paid pass vary by country, province and state. Have a legal advisor review them before you set your terms of sale, because they can change your revenue.

Later years. A new program can be sold to the same Pass Holders the following year, but we have no renewal rate to share.

Frequently asked questions