How to estimate revenues with several business model options?
How would you estimate the revenues on a business plan if you have several possible business models (i.g. Freemium and/or Advertisement). The revenues could be generated by one or a combination of these models.
Business Plan Revenue Financial
4 Answers
You need to estimate for each of the different business models individually. Then you will know what your revenue will be like for each avenue and it will be easy to estimate for combinations too.
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Right, in your business plan you need to make assumptions. You might due columns for each month.. Jan, Feb, March and then rows for Free users, basic paid user, ad revenue, etc. You then put counts or dollar amounts in each column based on your assumed free users, paid users etc. Then total them up each month and project out a year or two and you should have some good insight. – Ryan Doom 12 years ago
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I really don't like the line "Then you will know what your revenue will be like". No, then you will have a *guess* on revenue. Reality almost always ends up being totally different. And if the founders start 'Believing the Plan' instead of acting on true market feedback, then things tend to go badly wrong. Be careful with assumptions; they have a dangerous side. – Jesper Mortensen 12 years ago
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I agree with you Jesper. I am not a fan of much in the way of planning, I rather just do. That wasn't what was being asked though. – Joel Friedlaender 12 years ago
A good way to improve the estimates withing your business model is to look at similar competitors publicly available information. A wealth of information is available on publicly traded companies like Zynga and Facebook by looking at their government filings that are required for publicly traded companies.
Hope this helps.
Estimations, so many factors to consider... It's almost impossible to predict what your business will do. Otherwise we all would be rich and happy!
Why not focusing on targets and milestones? If you set a target of X at the end of a period of time, then your attitude will be working towards an objective rather than I estimated wrongly.
To usefully estimate revenue for an unproven startup that hasn't even built a product yet is impossible. To estimate expenses with pretty good accuracy is often possible.
That's part of why Guy Kawasaki suggested to make a MAT (Milestone, Assumptions, Tasks) instead of a budget in his book "The Art of the Start ".
Don't write a business plan with revenue forecasts that aren't based on hard data from existing users -- that will be unconvincing for an experienced investor.
Especially don't write a business plan which gives the appearance that you don't know which business model is right, or that you will haphazardly mix business models as you go along -- that sends all the wrong signals.
