Planning, Startups, Stories


Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

No, You Can't Just Pull Numbers Out of The Air

Question: I’m in the process of writing an Internet startup business plan to present to prospective investors. The site isn’t live so I don’t even have a basis for speculation with respect to the financials. I would essentially be pulling numbers out of the air. Being that the Internet business as it pertains to advertising revenues is so mercurial, is it feasible to present the plan without having the financials included? If not, how can I make more realistic financial assumptions?

My answer: No, you won’t get anywhere presenting a business plan to investors without financials. I’m glad you asked me instead of just moving ahead with that idea.

Every new business, including a website business, has to be able to present a reasonable forecast if it’s going to hope to get an approval from outside investors. And it can never be “pulling numbers out of the air.” The assumption is that before you start a new business you have some idea how it’s going to work, based on some experience. If you have no idea, no investor wants to even share the same elevator with you.

In this case, the website business, you need somebody on your team who can project website traffic and sales based on real experience with search terms, search engine optimization, Google ad words and its competitors, conversion rates, and so on. Your traffic doesn’t get pulled out of the air, it’s a function of what you plan to do and what you plan to spend. Know your key search words and the traffic those words and phrases get for others, right now. Know reasonable conversion rates. Make estimates based on real assumptions about real variables.

For more information on this, you could try:

  • Hi Tim,

    I wonder sometimes whether, when people ask questions like this, they’re really hoping someone will do the heavy lifting for them.

    Case in point: I saw an e-mail recently from a guy who had a “great” new business venture. It involved some kind of online platform for get-out-the-vote efforts. He said he knew that get-out-the-vote initiatives have been effective, but he wasn’t sure how much it moved the needle, or whether it was more effective with one’s base, independents, and so forth. He wanted to know if anyone could help him with that data and more. My first thought: I clearly know more about where to start researching this than he does (and this isn’t my area of expertise). My second thought: No, I’m not doing your market research for you.

    If you don’t have basic data, or have any idea where to find it, how the heck are you ever going to run a business?

    Have a great weekend,
    Daria

    • Thanks Daria. Yes, this is exactly the problem, and I think we help people by helping them understand that they can team up with people or get a job in a related industry but you just can’t start a business alone if you have no idea. Keep the day job.