

Ask HN: How to write financial projections? - macco

Hello,
at the moment I am writing a kind of an business plan for an incubator program. On point is to write projections of profit and loss for the next two years.
My problem is I don't know how to estimate sales. I want to sell a hardware product in the consumer market and I don't think I can make a serious statement about the sales in the next two years.
How did or would you do it. Any are ideas welcome.<p>Rockin' regards,
Marco
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aliasaria
My experience is that good investors know that profit+loss projections for
certain kinds of products at certain stages are pretty much useless. In these
cases, your goal is to make something that isn't laughable (when forced to
make projections).

It's easier to forecast expenses -- you know how many engineers you want, and
can guess at legal, rent, etc.

But it's also good, if you can't have a market ready piece of hardware within
two years, to have an alternate source of revenue in the beginning. For
example, you could sell a suped-up (expensive) early-adopter version for a
year which will serve as a prototype for the real (cheaper) consumer version.

Plan to sell very little in the beginning, as that's what always happens in
hardware. And consider planning to sell through someone else. For example, if
your device has to do with telephony, assume you will sell through one of the
major telephone networks in your area. Then guess at what percent of their
users in your target market area you can convert in the first year and
calculate your cut of the sale. It's easier to estimate sales if you're
thinking about taking a bigger and bigger slice out of a large, defined pie
(rather than growing from nothing).

~~~
macco
Yeah right, that is a good thought, you are normally not going from 0 to 100.
You need some kind of adoption rate.

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Alex3917
www.alexkrupp.com/projections.xls

I just added this for you. It should do the trick. Just use the tab labeled
"income statement_b" at the bottom and ignore the stuff in the other tabs.
Then you can just swap in your own numbers.

In terms of figuring out sales, just figure out how many units you can sell
per day. If you are in an incubator then you're probably going to be the only
sales guy, at least until you hire another. Here is what Guy Kawasaki has to
say on the topic:

<http://blog.guykawasaki.com/2006/11/the_art_of_proj.html>

<http://blog.guykawasaki.com/2007/07/how-to-write-a-.html>

~~~
macco
Thanks for the chart. That is some great work. I will use it tomorow, it is 3
a.m here now. The thing is a consumer you don't sell all your stuff all
personally. So its hard to tell, but maybe I should get over it.

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rms
It's better to make them too big than too small. There's no real reason to be
conservative, within reason. If you make them too small you force the investor
to think of ways that you could be bigger to generate the return that he or
she wants.

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bbgm
As Alex mentions, unit sales is usually the best way to do this.

Have you benchmarked sales figures for similar products as a possible
baseline?

~~~
macco
No, but I will try to get some more information on that.

