Estimating Revenues

New Businesses

A helpful way to think about estimating revenues when you haven’t earned any is to break it down by customer, then by day, week, month, and lastly, by year.

How much will a single customer be paying for their meal/product/service?$CustomerRevenue = Unit Price*UnitQuantity$

How many customers do you anticipate making purchases on a given day? $DailyRevenue = Customer Price*CustomerQuantity$

Compile the daily revenue into an annual projection. If you’d like to account for seasonality, do that at this step. $AnnualRevenue = Daily Revenue*365.25$

Existing Businesses

For existing businesses, we recommend looking at the previous years revenue and growing it based on a few factors, listed below.

Deploying the capital from the Mainvest campaign, how much do you expect revenue to grow as a result?

Factor in things like inflation, and any schedule priced increases.

Are you adding a location? A new service or product? Increase sales projections accordingly.

Projecting Over 5 Years

Now that you have the first year revenues, the growth needs to be projected over the next 5 years of the business. There are many factors at play, so consider the following:

1. Inflation & Price Increases

To start, revenues should increase around 5% annually to account for inflation and any price increases on the products and services.

2. New Products & Services

Any addition of new products & services can rapidly increase revenues. If a new product will double the size of the business or simply account for one more purchase a day is important to think about. This can result in 5%-100% annually.

3. Scaling Operations

The addition of new employees, sales tactics and more efficient means of earning revenues can result in natural increased growth. Depending on how rapid the business intends to grow, the result of scaling operations can increase the revenues 5-100% annually.

Estimating Cost of Goods Sold

New Businesses

Cost of Goods Sold (COGS) is essentially what it costs the business to produce whatever good or service is rendered and turned into revenue. Because of this the arithmetic can be more or less the same.

How much will a single customer’s purchase of product or service cost the business $CustomerCOGS = Unit Cost*UnitQuantity$

How many customers do you anticipate making purchases on a given day? $DailyCOGS = Customer COGS*CustomerQuantity$

Compile the daily COGS into an annual projection. If you’d like to account for seasonality, do that at this step. $AnnualCOGS = Daily COGS*365.25$

Existing Businesses

For existing businesses, we recommend looking at the previous years COGS and growing it or shrinking it based on a few factors, listed below.

Deploying the capital from the Mainvest campaign, will there be any impact on lowering the price of goods to the business?

Factor in things like inflation, and any anticipated price increases.

Is the business adding any new processes that will increase the efficiency and result in an economies of scale, thus lowering costs?

Projecting over 5 Years

When thinking about COGs, one shouldn’t think of growth percentage, but instead Gross Margin:

Growth Margin = ((Revenue - COGS) / Revenue) *100

1. Inflation

This should increase COGS alongside revenue linearly.

2. New Products & Services

Any addition of new products & services can result in a lower Gross Margin, since the cost of a new, less established product can be higher.

3. Scaling Operations

The addition of new employees, sales tactics and more efficient means of operating can result in natural decrease in costs per unit. Depending on how rapid the business intends to grow, the result of scaling operations can mean the Gross Margin increases considerably.

Estimating Expenses

New Businesses

Expenses are everything outside of the cost associated with producing each good/service a business sells. Some expenses are fixed monthly fees, while others are variable depending on how many employees there are, and what the business does. Below is a quick preview.

• Rent: Fixed

• Utilities: Variable

• Salaries: Fixed

• Insurance: Fixed

• Equipment Lease: Fixed (most of the time)

• Repairs & Maintenance: Variable

• Legal & Professional Fees: Fixed

• Marketing: Variable

Existing Businesses

For existing businesses, we recommend looking at the previous years expense items and growing or shrinking them based on a few factors, listed below.

Deploying the capital from the Mainvest campaign, will there be any impact on lowering the expenses incurred by the business?

Factor in things like inflation, and any anticipated price/salary increases.

Projecting over 5 Years

Expenses, just as they vary in year one, vary over the course of 5 years. Things like staff size and insurance and rent may stay the same in a given year, but change dramatically one year to the next. It is crucial to think deeply about each individual expense and how it may increase or decrease with time.

1. Inflation

This should increase all expenses by at least 3% year over year.

2. New Employees

If personnel size or compensation changes, the salary expense (common to be the largest expense) can vary.

3. Scaling Operations

Adding new services and locations can increase many expenses, like Equipment and the closely related Repairs & Maintenance.