Wondering about business plan guesswork? Curious about what things are appropriate for “shot in the dark†guesses as opposed to deeply researched estimates? This is an interesting question and something that has generated some lively discussion in the entrepreneurial community. In general, the better researched an issue in the plan can be, the better. You'd be surprised how many leads and insights you can find in publicly available sources that can help inform your estimates. But if there's no way to know something – say, you're introducing a new patented device that has no comparable in the market – there is nothing wrong with guesswork. Determine the estimated size of the target market and assign a penetration rate for your business – voila. Your plan's guesswork might include:
• The type of consumer most likely to purchase your product
• The price at which to value your service at market
• The sales benchmarks achieved by private competitors
• The way the industry will grow over the next 3-5 years
• The cash burn rate your business will experience during start-up
As a general rule of thumb, just remember that citing your research and providing the assumptions that underlie your guesswork will help make it more palatable to a critical investor. If you've pulled a number out of thin air, at least give an explanation of why this figure makes sense to you. It might feel like a loose assumption, but it's still better than nothing. As any consultant will tell you, the most important aspect of the financial model is making it work – getting it to the point where the net profit percentages are in line and the revenues seem tenable yet reasonable. Want help here? Take some of the guesswork out by calling the experts at Portland, Oregon's MasterPlans.com at 877-453-2011.
