Assistance with my business plan
Hello everyone this is my first time posting and I must say I’m really happy I found invaluable website. I am currently writing a business plan for an idea I have but I’m unsure of how to obtain the financial figures to show how much the business can make. My business will be a website based on a social networking platform. The primary source of income will be through targeted advertising and sale of market/trend data(which there will be a lot of). I am finding it very difficult to find the right person to talk for a rough estimate. I have no market research to show the projected hits my business will make. I have been looking for is a rough estimation of the projected earnings based on the type and amount of information sold and commission made on sales through ads based on certain levels of hits made through my website. My main problem is that the only people who can give me this information are essentially competitors. This means I cannot put a price on my primary source of income. What I would ideally be looking for is an individual or organisation to look at our business model and work our the projected earnings. Otherwise I would be happy with some rough estimations. Thanks Stuart MacMillan
There is no sensible answer to your question of income. That is to say its impossible to predict. Anyone who tells you otherwise is a liar.
The best you could do by looking at competitors would be to understand the ratio of users to income, but as you say you have no chance of obtaining such data.
The most likely answer is nil. Ie you will make no sales of any value. Or you might make a lot. And awful lot. But how big that number is anyones guess.
So what do you do? Well it depends on the purpose of the business plan. If its for someone from a bank, then stick anything in that looks good. They wont know either.
If its because you want to know, then you need to look at it in another way, ie look at your costs. Look at how much it will cost to run the site on a per 1,000 user basis. Look at how much revenue you will need to meet these costs. Then its your guess if you can generate it by looking at things such as advertising rates etc and clickthrough prices in your niche. Google tools are good for this. From this you can build up some sort of understanding of what you need to do to make money, and how many users and what sort of return per user you will really need to do the basics of covering daily costs, covering the investment and finally making a return on the project.
This tends to focus the mind somewhat in terms of what sort of size it needs to be and how much/little time and cash you want to risk on the project.
This is along the lines of breakeven analysis which is a far more powefull tool than a traditional monthly P&L style working which will be next to worthless in this context.
I hope that helps,
James Smith [i]Chartered Accountant[/i] www.jamesesmith.co.uk --------------------------- Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
Great answer from James as usual.
I always post this link – http://www.sequoiacap.com/ideas
Via sequoiacap, a really good overview from probably the world’s most successful VC.
Thank you very much for your help I will look into this.