When you’re starting a new business, it can be really exciting to think about all the money you’re about to make. Nothing quite like your product exists today, and your friends and family assure you it will be a hit. You’ll make millions, surely. But how long will it take? And what do you need to do to reach those lofty goals?
Projecting revenue in any business is a bit of a game. It’s part educated guess, and part big hairy audacious dream. If the market for your product is growing and you have some capital to jumpstart your growth, you might be able to grow revenue faster. On the other hand, some economic event might happen that you can’t predict, which sends sales spiralling down – and in that case, no amount of marketing will help.
When you first get going, it’s hard to know whether you should be realistic or idealistic with your sales targets. Let’s look at some of the pros and cons of each.
The Idealistic Revenue Forecast
Pros: Big revenue targets can be motivating – especially if you make them public. By claiming to your friends, your mom, or even the bank that you can achieve a hockey-stick growth forecast, you’re on the hook to make sure you do it.
Cons: Many entrepreneurs forget to acquire the resources they need for fast revenue growth. If too many orders come in and you don’t have staff or inventory to fill them, you could be looking at a PR nightmare. Also, to get lots of sales, you have to do a lot of marketing – and there’s a time and money cost to that. So if you’re not prepared to do some spending, idealistic forecasts could leave you looking pretty silly at year-end.
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