Jim Logan says that the most important number to focus on in a business plan is the nearest revenue number the company lists. Typically this is the Year 1 revenue projection. Hone in on that number (ignore all the others, I'd say) and ask the following questions to make sure the entrepreneur knows how s/he's going to hit their first revenue forecast. If they don't know how they're going to hit the first number, how will they hit any of the others?
- What is the profile of the person you’ll primarily be contacting?
- Who influences the person in their position?
- What does this person value or fear in their job?
- What are the steps to your target account’s typical purchase cycle? How do they make decisions?
- What are your sales steps?
- What is your anticipated sales cycle?
- What is the expected time for each of your sales steps? Did you factor in time for making contact, scheduling, negotiating, etc.?
- What is the expected value of your average transaction?
- What is your expected close ratio?
- What is your expected time to revenue?
- What is your expected time to cash?
- How many prospective accounts do you expect to have to engage with each month to meet your revenue forecast?
- How are you going to find these prospects?
- How are you going to contact them? What means?
- What lead generation activities do you have planned?
- What sales tools do you have?
- What sales forecasting and review process do you have in place?
- How accurate were you past forecasts? Did they adjust much weekly and monthly? (a really bad sign)
- What is the skill-set and number of sales people you must have to reach your revenue forecast?
- How will the first customers weigh on the organization’s ability to continue to sell?
- What are your booking and revenue recognition policies?
Here are 50 side businesses you can start on your own. Here are 10 outstanding lessons from a failed start-up. Here's the founder of And1 talking about how he built his company.
3 comments on “Most Important Revenue Number in the B-Plan”
From Fb, DaveJ:
Since you love “rules of thumb,” here’s one: assuming experienced entrepreneurs, the ability to answer these questions in advance is inversely proportional to how innovative the product is. In other words, if you’re selling something that is simply faster/better/cheaper than what’s out there already, you should be able to answer these questions up front. If the product introduces new paradigms or restructures the market, then answering these questions is one of the main jobs for the first two years of the business. Either situation can be a great business, but they look very different from a planning perspective.
Thanks for the thinker-iffic questions, Ben. Yours Truly is in the process of starting a side venture. Excellent heads-up for the questions I’m about to be asked.
Having gone through an IPO in 98, when the mantra was grow at any cost we’ll work on the profits later, I found that the cheerleader CEO’s are disengenuous.
Just wish the VC’s would have done due diligence.