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How do I communicate my revenue model in a business plan
kamolahy
subscriber Posts: 27
So I`ve finished everything in my business plan except the financials. I set up a meeting for friday with an Angel Investor, and we`re gonna talk shop. It`s a lunch, so I don`t know if he wants me to bring my whole business plan, but I intend to have it ready. So, here`s my thing. My business that I`m starting is an Internet business that offers totally free services. That being said, we`re thinking of premium services, but hoping that advertising carries us. I know many big sites have done it, and I think we can too. We`re also hoping that our value in the marketplace will drive big revenues through other "undisclosed" methods.The question is this: how do I communicate my financial plans to an investor when the model is so vague like that? I can`t do my month to month projections, it`s just too hard. What would you do?
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Comments
Product Offering
It sounds like you understand the product offering. If you are struggling with the upgraded product offerings that you can charge for, that is something different that financials. This is more of a product definition question.
Take Rates
If you know the premium services but are concerned with the take rates of the premium services, the idea of a business plan is to make educated guesses backed with industry resources. The plan helps you illustrate how the business has to scale pay for the proposed level of infrastructure (operating and capital investment). It creates an idea of what you have to believe to break even, become profitable, scale-up points, etc (X people buy Y services @ Z prices). I would imagine that most investors would like to see 15%+ Return on Invested Capital (ROIC) so this is going to be important. I would also imagine that a Break Even Point analysis would be key. If you can hit this on the head in a 1-2-or 5 year period you are darn good.
Pricing
This is a bit more of a complicated question. This will highly depend on the market, supply, demand, etc. This is a situation where best guesses work well with lack of industry experience. If this is not a new service, there should be some competitive information that you can source.
Good Luck!