Need help with revenue assumptions and forecast!
Hi,
Need help creating a revenue forecast for a web start up that is similar to the business model of ebay. This site does not have any listing fees.
This has to be projected 3 years out. So after the first year, how would I get the 2 and 3 revenue? Should I just use an average growth rate from other comparable websites?
For revenue assumptions I have:
A) Sell through rates for other auctioning websites regarding listings.
B) User base growth for first year of business from one comparable websites.
Basically what i did was take the user base for that comparable website in its first year and divided by the number of days in a year to get the user growth per day. Thus allowing me to get potential user base each month to base my revenue off. Is this correct?
C)Transaction fee.
D)Number of listings in first year.
Is there anything else I should be adding. As well, are there any good websites to find data on user growth, revenue, and etc for start ups or established companies with data available for the first three years.
Thanks alot!
Forecasting revenue for a startup at year zero is so uncertain that it's probably not worth wasting your time until you have a year or two of historical results under your belt to work with. You're mostly going to have to wing it. It does sound like you're on a good path to come up with some realistic numbers though.
What is the purpose of the forecast? You need to keep in mind that forecasting is only useful if it is realistic and provides a sense of accuracy. Meaning, if the forecasted revenue has a chance to be off off by a few % points then it's not going to be a big deal, but if you're off by 75% (and you could be off by much more for a startup) then it provides no value other than as a list of possible outcomes among many. Unless you are sure of your forecast numbers to the point where you would spend the companies money betting that they are accurate then I don't see the point in forecasting for a startup company at year zero. Especially an internet startup with so many variables.
If you explain the purpose behind your forecast a little more then maybe we can think of some better alternatives or ways to help refine it.
"If you explain the purpose behind your forecast a little more then maybe we can think of some better alternatives or ways to help refine it."
Well I am trying to create a business plan that potential investors will see. Therefore, I want to give them a realistic number without looking like an idiot.
You are correct in saying that trying to forecast revenue for a start up is really hard. However, i think that if have the right assumptions and comparables that i can somewhat predict what they may look out.
Another person suggested: "I would rather start with the addressable market of your product niche, then drill in from that by identifying a target penetration rate."
However, I am not sure how to go about this, can you or anyone shed some light?
another way to go about this..
set a base case of expected growth (30%, 40%, 50%) in the consecutive years.
and then frame sensitivities around it either through data tables or manually building out a switch.
So in downside case A, they only achieve 75% of their projected growth, in downside case B, they only achieve 50% of their projected growth, in downside case A, they only achieve 25% of their projected growth, and the like for an upside case.
it looks like you are using a bottoms up approach so i assume this is more for forecasting purposes rather than valuation.
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