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Happy New Year!

I am beginning to write a business plan for a future startup based on an innovative software technology I developed. An actual product is still in development.

I am using a dedicated tool that guides me through a systematic set of questions to come up with a quality plan.

One of the steps is to set objectives. One (or more) of the objectives is typically a sales figure in the first 1-5 years.

How do I project these figures, when I don't even have a clue what sales would be like?

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2 Answers

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You need to create a sales model outside of this tool. The best way to do that is to find a similar company, with a similar product that is selling right now. Them you iterate on it until you come up with the sales you need/want.

If you search for Sales Modeling, there will be a couple of articles on how to do it (even by me).

Modeling is an iterative process that gets better over time. The most important thing to do is build a model and tweak it as you go. That way, when new information becomes available, you can adjust the model without having to redo everything.

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Thanks for your thoughtful answer and +1. How do I find sales data of a particular company, especially if it's privately held? Or still in the non-revenue phase? – Eternal Learner Dec 31 '10 at 16:14
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You can do that a couple of ways. You can look up the NAICS code for the business you are in and get some general numbers. Press releases are also a good source. Some companies will send out a press release on the number of users or whatever. If it's a web based company, then looking up it's analytics and making some assumptions can get, for example, subscription rates. – Jarie Bolander Dec 31 '10 at 18:11
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I know that it might sound harsh, but stop writing the business plan.

The only valid reason I met so far to write a business plan is to get some, usually government-issued, funding (for instance, I saw that happening in Germany). Note also that seed investors usually don't read and don't ask for a business plan.

If the product is still in development the best use of your time is to go out and meet the potential customers of your product. Ask to meet them, present your product and ask for feedback. You will learn

  • who is your target customer
  • how many of your target customers are actually interested in buying your product
  • how much they are willing to spend

Now, when you have learnt all these things, you can also go back to your business plan and fill the sales forecast. Otherwise, as you already figured out, it's just pulling numbers from thin air.

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Thanks for your thoughtful answer and +1. Yes, the product is still in development. Meeting with potential customers at this point seems impractical because I am a currently a sole developer with the only "advantage" is the limited-time confidentiality (the technology is patent-pending with less than a year to become searchable at the USPTO). Flying low under the radar seems to be critical as prospective customers like Google could easily throw in a team of geniuses to develop a product for much less... – Eternal Learner Dec 31 '10 at 16:12
+1 for ditching the Biz plan and focusing on what's important -- namely your target market and product development. You still need the components of the Biz plan but writing a formal document is a waste of time. – Jarie Bolander Dec 31 '10 at 18:12

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