How do I estimate revenue for a business that hasn’t launched yet?

    Published: 06-16-2009
    Views: 21,954
    Financial expert Fred Glave discusses how to estimate revenue for a business that hasn’t launched yet.

    Speaker: How do I estimate revenue for a business that hasn't launched yet?

    Fred Glave: In order to estimate revenue, we are going to use the profit and loss statement from our web page that I indicated before. So simply go to score.

    org, click on Business Resources and Template and pull up the Excel spreadsheet that says 12 month profit and loss statement. What you are going to do is make an estimate of your revenue for each month of the first year. Now, if you are in the manufacturing business, you are probably going to be making more than one widget. So you need to make an estimate of the revenue for each widget that you are going to sell for each month of the year. Even if you are in the restaurant business, you may want to break down your revenue by breakfast, lunch and dinner because each of those will generate on average a different revenue stream. Similarly, if you are in the Internet business and you are going to monetize your business by selling ad space, you may have two or three different categories of ad depending upon the size of the ad, the placement or the frequency even 00:57 that you generate. So what you do is you make an estimate for each month of the year, the number of units for that category of product, multiplied by the price per unit that you are going to sell that to a category of product ad and that will give you the revenue for that month. So you go through the total spreadsheet filling out each of those columns. So for example, if in month of June, that's your starting month, your first category of widget you are going to make three of them and sell them for $12 and then you are going to have a total revenue of $36 in the month of June for that particular widget and you go through the whole spreadsheet filling out each cell in that manner. Then at the end, you will add up in fact the spreadsheet will do it for you automatically and you will generate a total revenue for each month of the first year and then you are done. Now, it's important to recognize this is not a forecast. You can't forecast a business that doesn't exist yet. So you are making your best estimate of the amount of product that you are going to sell in each month of the year. Again, I would urge you to be conservative, because if you plan your business on selling a lot of product then you are probably going to plan on spending a consequent amount of money on expenses and if you don't sell all that product, your expenses are going to be too high. So be conservative in terms that your revenue objectives.