Projecting Sales for Web Dev Business Plan


3

I am putting together a business plan for my Web Development startup.

Cost of materials, marketing, etc. are the easy (fixed or one-time cost) parts - but I am trying to figure out how to create a projection for profits for the first few years of the business.

However - since it's a B2B service, it's reliant not on purchasing habits of consumers - but on the rate of sales, and the life-cycle of customers. Throw retainers and shorter-term projects into the mix, and I am at a loss as to how to project sales.

Has anyone gone through this? What did you do to project revenue?

Finance Web Business Plan Business Web Dev

asked Dec 18 '12 at 09:00
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Itamar
116 points
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4 Answers


1

Obviously you will not be able to project any meaningful sales figures easily, even if your product is not completely new: even then it would be risky to use other, similar products as examples since you would imply that your team, your sales strategy, your target market, etc. are all comparable for your assumptions to hold up, and I therefore would not recommend doing it.

The good news is that investors will not expect you to have precise forecasts - if they do, they do not understand the startup business. What they will (and should) expect, however, is that you have done your homework.

And by that I mean that you can test your market before even releasing your product. You will have one or more hypothesis about your business (growth and value hypothesis, for example that customers will like your product and also be ready to pay for it). Have you tested those hypothesis by engaging your customers? One of my clients is currently testing the market by launching a mock up page of his product and by measuring:

  • how many people search for it?
  • how many people actually go to the site and sign up?
  • how many of those who sign up actually try to buy something?

The purchase part is still a stub and leads them to a page saying "coming soon" or something like that, but it gives him a good enough feeling for his potential sales in a defined market!

Since your product is B2B you may have different sales channels, but you can still use the same approach. There are similar testing methods for B2B businesses which will give you customer conversion metrics. Those you can then use to back up your sales projections, and I think those are also good enough for investors to understand that you know what you are doing.

If I can be of more help, let me know: contact me here

answered Jan 5 '13 at 22:21
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Matthias
81 points
  • Matthias has a great point here: "customer development" is the number one job you need to do, way before you actually complete any real product. Until that, rely on assumptions for targeted markets that you derive from observation (market studies with size of markets, trends, competitors). – Hans Fremuth 10 years ago

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It is very difficult, but if you know your fixed costs and how many resources you'll have available to generate revenue, you can make a wild guess. This is the main down-side to business plans - they are theoretical and never reflect reality.

I suspect that businesses like this develop organically, rather than as a result of executing a plan. For example, one person may be doing web-dev work, then realise that they have more work than they can handle, so hire someone to help out, then they reach capacity, so hire another and get a proper office, etc.

answered Dec 19 '12 at 21:00
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Steve Jones
3,239 points

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Until you have a track record on something like this, it's hard to make projections that are better than WAGs (wild ass guesses).

  • What is your mix of services vs products?
  • What does your sales cycle look like in terms of timing and cost?
  • You need to know your billing rates which are easy to know up front and adjust as necessary.
  • You need to know how many people will be on your team which is easy to know up front but hard to project the growth.
  • You need to know what your average project looks like.. How big is it? How good are your estimates? Do your customers pay on time?

Track everything and be very conservative where you spend your cash. Remember.. cash is king. Most companies fold because they don't have the cashflow they need.

Once you have a feel for how the cash flows in, out, and the cost of acquiring those customers and cash, update your projections. I would recommend doing it every 60-90 days and always try to project out at least as far.

Once you've done that a few times, you should be able to project 90+ days out with some confidence and create educated guesses for 180 days out.

answered Jan 6 '13 at 06:04
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Casey Software
1,638 points

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You have to make some assumptions - what rate you will charge, what % of your time will be billable, and so on. It might be helpful to make best-case and worst-case assumptions, so you can see the range of possible outcomes.

answered Dec 28 '12 at 03:05
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Davidwebster48
111 points

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