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1) Our company is asked to produce a financial forecast, but how do you do this? normally you will use data from similar businesses in the same industry. Ok but how can we do this when our business model is different from our competitors business model?

2) How can a business produce an accurately financial forecast for a start up? where is your reference point? its a start up, your not going to know your growth rate from year to year etc

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Generally you cannot, you just made it up, or let's call it as an "educated guess". Sad but true. – the dictator Mar 10 '11 at 17:06

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The formulas I use for my personal site are:

  1. Before launch, look at the market. Find the smallest yet reasonable player that has the most comparable service to what you have (if you are building office softawre dont compare yourself to MSFT rather someone some on download.com). Determine your pricing. Divide your pricing by 2 to account for costs. Then take 1-2% of what your competitor does per month, multiply it by your 50% price and you have an idea of the potential. Its very conservative, but teaches you not to go after small apples, and not to have your head up your ass daydreaming about how much money you could make.

  2. Once your product is launched, you can look at its track record. We look at how much we have made over the past months, multiplied by how much we can invest in marketing, and how much market share we estimate is left.

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+1 @Frank: Nice approach. The toughest number to come up with is sales. Rent, utilities, advertising and so on can either be determined by research or extrapolation. But a startup is an experiment. Until you get some experimental data back on market adoption of your product, you need to use your best educated guess. – Jack Rodenhi Sep 7 '11 at 20:21

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