Planning a New Business - Building a Revenue Plan

Now that you have thought through who you are selling what to and how you will do it, you will be prepared to build yourself a revenue plan. There will be a few iterations of this plan so it is best to keep it in a format that can be updated easily. Something like Excel.

There are 4 things to ponder at this point.
- How many Leads am I going to get?
- How many of them will become Customers?
- How Long will it take to acquire a Customer?
- What is the Average Sales Price to a Customer?
- How many Transactions per Year will a Customer do?

The first three questions are questions about your Sales Process. They need to be understood in your repeatability thoughts. The challenge when starting a new business is that customers do not show up and start buying your products and services without some stimuli. For a business like a restaurant, the delay to getting some customers can be very short. A Tier 1 Telco, like AT&T, might have a multi-year sales cycle. This is all about the business you are in and the customers that you target.

The reason that this part is important is that you need to know the arrival rate of customers. Needless to say this is why we measure the effectiveness of a Sales Process. Regardless of the quality of the process, you need to estimate how many customers will show up and when that might be.

Once you have a number of customers and when they might show up, then you need to think a lot about the price that you are selling your products and services. There are plenty of strategies to talk about pricing but you will directed by your Ideal Client and your competition. One of the most important parts of pricing is to look at your Unique Value Proposition (UVP) and measure the value proposition by the importance to the customer. The importance to you is not important in this calculation.

Once you have estimated when the customers are showing up, how much they are spending and how often they are spending it, you have your first shot at your revenue. If you have used Excel or an equivalent, you can then take a look at some "sensitivity analysis". This means change one or two of the numbers and see the impacts.

From there you can look at the Outcome and see what you think:

- Does the revenue meet your expectations? If so, then you are good to go. If not, then;
- What are changes that you could make to get revenue where you want it?
- Do the changes obsolete your plans or just adjust them?

This is step one of putting some firm financial numbers behind your business plan. Next week, we are going to take a slightly different way of looking at the Sales and Marketing numbers behind your business.

Jim Sackman
Focal Point Business Coaching
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