Five year projection...

cugelert

Hi everyone... I recently attempted to write my very first business plan totally unrelated to another project some of you may have seen here posted a while back.  And it looks great so far...  Anyway, my question is... how do I project 5 years of future earnings based on a product that isn`t on the retail shelves yet?I have a new product I wish to sell.  I finished my concept and design stage, preliminary market analysis, overseas quotes research for China, and have even researched import tariffs, acceptable plastic polymers, freight charges, dock fees for Long Beach, Ca., licensing, tool & dye costs, holding fees, ground freight fees.  Nearly everything is done now, but I need a business plan for funds to get the last part of this venture completed and I want to look like I know what I`m doing (which I do but not on writing the plan), how do I calculate an acceptable five year forecast for sales?  Is there a formula?thanks in advance for any input... Cu Gelert 

asykes

Hi,There`s no formula as such, but try to be realistic. Venture capital will run a mile if your projection looks over optimistic. Over-optimism tends to suggest a lack of objectivity.

Eric

Cu,
For an entirely new product all of your projections are guesstimates. A Five year projection is almost worthless without an established system of sales and distribution.
It`s more an excercise in optimism than it is a real calculable figure but as such serves the purpose intended.....gets you thinking about the possibilities but as asykes said keeps you grounded in reality.
 
 

cugelert

Thanks for the input asykes and eric, but still, I have to come up with some realistic looking figures and not far fetched...  According to my numbers so far, I can get the whole shipment to the purchaser at an absolute highest estimate of roughly $15 per unit, and I`m still trying to bring down the costs to around $12 and I`m pretty optimistic on that, and that number includes my profit, and the MSRP is easily $25 to $30, or more, depending on the rest of my market analysis and the final design of the product which is almost ready.  Just a couple minor tweaks left.I`ve even gone as far as designing improved models to follow up later after a year or two.Merchants should be able to make a handsome profit using these numbers.Anyway, back to the topic at hand... is it reasonable to use these preliminary numbers to calculate the projection?  And if so, how many pages (typically), or how detailed should each year be?  And how do I carry over to the next year with an assumed increase in sales and what information do I base it on?Cu

Eric

Cu,
Know thy market.
No really. If you have merchants ready and willing to buy, certain that your product will sell and the many people that have your product have professed it`s greatness, you can make some initial assumptions.
But long term projections are an inexact science at best. Whoever you are pitching a 5 year figure to will know this and will not give much weight to your numbers. I believe that when somebody asks for a 5 year projection they are looking more for what is, even in someone`s mind, a possible figure. They don`t know the product as well as you do. I`m guessing that they want you to stick your neck out and put your intentions on the line. My understanding is that 3 years is a stretch for projections on an unestablished product. 5 years would be considered hopes and dreams........ not a bad thing to have though is it?
I`d love to hear more about the product but believe me, I know how that goes!
Good luck Cu!
 

infinique

You might want to adjust the business plan to 3 years projection as 5 years might be too long.

adelaidegirl

I can help you with these if you want some professional help. They are my specialty and I do pretty realistic projections. I do not come cheap though (sorry).
Otherwise there is plenty of information on the internet. Definetely download one of the excel spreadsheets available and follow the notes. I will see if I can dig one up and post it for you a bit later.
You want them to be realistic as you are wasting your own time otherwise.
good luck!