How to make projections for a business which has not started

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Video Transcription: In this video let's talk about how to create revenue in profit forecasting for a new business which is much more difficult to do than for an existing business because you don't have previous data to base things on so it's really going to be educated guess because we really cannot predict the future that Wow the one thing that's the same is of course you need to have a timeline for your forecast it could be three months six months a year three years five years whatever you like of course it's not not that difficult to know what your expenses might be you know what your employees cause you know expense salaries might be you know what your rent is so a lot of the fixed and variable costs are relatively predictable of course there are is going to be room for error but it's relatively predictable what's really hard is to predict the revenue because you don't know if you're gonna be making zero dollars or a million dollars right there's a couple of ways a couple of tactics people use to predict what your revenue might be and this is either by yourself knowing your industry deeply or by hiring a consultant who maybe has been a successful entrepreneur in your industry who can tell you what can be expected or you can base your projected revenue and income on competitive similar businesses this has some pros and cons of course if you take a facebook for example let's say you're starting a new social network and you decide to base your own projections on Facebook which is your competition because you might be starting a social business a social media business well then guess what you'll say my business is obviously projected to make a billion dollars and of course that's wrong for almost all businesses so you always want to understand when you're basing things on competition.

You want to get a full range of businesses and have a really deep understanding of what really happens to new social network businesses of course many many many of them die in silence we don't even know that they existed some of them become niche social networks like maybe social networks only for basketball fans or sport fan so maybe they go niche so it's possible that comparing yourself to Facebook was wrong in the first place because very few actual social media sites are like Facebook so there are some pitfalls with directly comparing yourself to other companies and basing your projections on those companies I recommend doing a combination of all three definitely research your competitive companies that are very similar to yours and see how it was for them when they started out the problem is that many of course are private companies and it's not that easy to get that knowledge it's not that easy to get their current revenue because many companies are private so because of that you might want to hire executives or founders of those companies as consultants or coaches so they can explain to you what you can expect of course the best option also is if you have deep knowledge and experience in the industry in which you're starting your business because if you do you will have much more confidence in your projections and it will be based on your experience and knowledge that's why it's always recommended that people start companies in an area in which they know so those are the three ways kind of to use to get a good sense of what you should how you should project your revenue and profit and what you can expect in addition to those you always have to look at your ecosystem if sometimes online there I kind of call them ecosystems like if you're selling one on Amazon then of course your ecosystem is Amazon if you're selling courses on udemy then your ecosystem is udemy.

If you're you know on some other website like YouTube you have to consider how that's growing or if your local business for example which is another very common type of a business then you want to consider the the the health of your current area are you in a city or neighborhood that has you know improving demographics people are moving in who are wealthier or opposite so that that's also something to consider and then you have to consider the overall economy growth so like is the economy in an upcycled so that means for the next couple of years you can't expect you can expect you know at least no hiccups and general spending growth from consumers but if the economy's in a down cycle you want to be extra careful because that's extra risk people will not spend money as really and your business might have trouble growing so you also want to create your customer profile and estimate what percentage of your target market you might be able to capture based on the differentiation of your company maybe you offer something that a part of the target market will really appreciate and so you can count on them switching over from whatever they currently use as their solution to your business and of course you want to be able to research general market trends what I wanted to suggest is one website its census gov you get a lot of website you get a lot of data and sensors information and statistics of what people happy people are spending what people are doing the demographics of different areas so that way you can understand what's happening within your local ecosystem and maybe even your greater ecosystem like parts of the economy that your business is concerned with so these are all the ways that will help you make good solid projections for a business that has not even started