Help Calculating Projections....

judgeschmellsjudgeschmells Posts: 1subscriber
edited September 2006 in Business Planning
Ok, we have a very interested investor on board who loves our model and our stats so far (we have been open 3 months.)  However, we are at the point where we need to provide projections and such.  This is killing me.We are an internet based business and we have three months of data so far.Our revenue increased 150% our second month and 220% our third month.  At first I thought I could just multiply our last month`s gross revenue by the 220% and then the next months gross revenue by 220%, etc. etc. but in about 6 months we would pretty much own the universe.  Obviously we can`t continue to grow at that rate, but how do you determine at what point your sales would start to even out?Any ideas?Thanks so much!Judge S.

Comments

  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    When projecting for an early stage business (such as yours) I find it works better to use dollars not percentages - especially on a month-to-month basis. (the first month went from zero and no matter what the actual $ were the % growth was infinite).
    Make an assumption about the $ level of revenue you currently have and see how that lays out on a one year basis.
    Also, I`d suggest getting some expert assistance to guide you through the creation of your pro-forma.
     
  • ideaanalystideaanalyst Posts: 0subscriber
    Hi Judge,Every business has a point where it will level off, so to speak and this is different for every industry. You should reach a point where you can assume steady growth, it is quite common for businesses to grow 15-20% a year and this, is considered to be very favorable. Depending on your industry, you may experience growth above this for the first year (launching of product of services) and then meet this, or rise above this expectation, for example. It is hard to know for sure unless I would know more about your industry, products and services etc.When doing pro forma financial projections, it is great to have a benchmark to follow. Have you identified your direct or indirect competitors? This may give you some idea (basing it off of other companies historical financials to a certain extent, for example). Determining realistic assumtptions first is the most important thing, and making sure there is a distinct mentodology of legitimacy to support this is another. Look at how many services your company provides and how many units of this services you expect to sell. You could determine this by also factoring in a percentage to know where you stand and to better substantiate your rate of growth. This will also need to take in account the current conditions of the marketplace, to better support any claims you make in your projections.I would be happy to discuss this with you further. My company provides these services so I am quite familiar with the process and the importance of the projections when seeking investment or loan capital for the start up or expansion of your business.Best,Lisa
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