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Thread: Researching Revenues

  1. #1

    Default Researching Revenues

    Hello all!

    My wife and I are in the early stages of starting our own business. Our business plan and many, many spreadsheets of data have been compiled. Forgive me if this is a repeating topic, but I have searched and cannot find any direction. We don't know where to find the sales, profits, etc... for comparable business currently operating. We took one class through SBA Denver (and plan to take more) and they mentioned that this data is available. We just don't know where to find it. Is it through the IRS? Any guidance would be greatly appreciated. I can Google with the best of them, but I'm stumped. Thanks.

  2. #2
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    Welcome to the forum TheBacas. What kind of business are you and your wife planning on starting? Also who is the plan for? Is it for the two to help with the business or is the plan for the purpose of getting a loan?

    I've always thought a lot of those numbers were more guesswork than anything else. You need to fill out that kind of data if you're looking for financing, but if you aren't you can play around with the numbers. If the plan is for you then you can estimate different values and create different scenarios with the results. Create a very conservative scenario with low sales and low profits and see what it would take for the business to get where you want.

    You pantry other numbers and create other scenarios to give you a good idea of how many sales you do need to make and what kind of margins you need on those sales. See all these different scenarios as different ways your business might be successful or might have challenges. Fill in the parts you realistically can and then use the unknown values as different possibilities.

    Some things about sales and profits per sale are really up to you. It depends on what part of the market you want to serve. I think a good amount of a business plan is for you to explore and figure out how you want to set up your particular business.

    I hope that makes sense.

    If this is for a loan then you would need to put in more realistic numbers, though you still have to guestimate some of the projections.

    If we know what kind of business, someone here can probably point you to a source for some data. It might not be exactly what you're looking for, but it'll be data to help you guestimate better. For example whatever industry you're going to be in someone has likely down a survey showing average salaries or rates across the industry. That might lead you to something closer to what you want.
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    The data that's available is only on larger public companies and guesses by analysts on the industry as a whole (and larger companies in those industries). Having watched a business plan come together for a large organization within a huge tech company, I can tell you that some of the numbers come from stealing someone else's guess and running with it.

    I think too many people get hung up on "well the market is this big and we can get that percent of it!" That's just hoping for success. And unless you're looking for an investor, it's just a game you're playing with yourself. And a savvy investor will spot it anyway.

    Instead you should figure out how much money you have to invest in generating the marketing and sales efforts necessary to drive revenues. And then what you need to make on that investment to be break-even in the first year. And then figure out what part of the total pie that is. And then throw all those numbers in the trash except for the cost side, because that's the only numbers that truly will kill you in the first year. Assume you won't have revenues unless you're starting out with a few customer purchase orders in hand and work from that pessimistic view to see if there's a way to stay alive long enough to get those first purchases.

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    You really can't use another company's data to determine what your sales and profits might be. That would have no bearing on your business. I understand you want to use comparables to try to figure out your numbers, but that won't work. You have to figure out (and yes, it can be a guessing game) how much you anticipate in sales and expenses under your particular scenario. A similar company might show $5000 per day revenue but what is their history? Where are they located? How long have they been in business? What is their level of experience? The questions are endless. You might have a similar business model but your sales might only be $100 day for whatever reasons.

    Start with your best assumptions as to how much you anticipate selling per day. Be brutally realistic. Then go from there. There are detailed instructions if you follow the link in my signature.
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