Tuesday, December 16, 2008

Let's Be Realistic

Since my experience with start-ups began a few years back, I have seen many examples of top-down forecasting that has left many venture capitalists wondering if the speaker had any credibility whatsoever. Top-down forecasting is taking the market level from it’s highest point and working down to come up with your sales figures.

What I mean by this is take the Chinese marketplace. If you wanted to sell a service to the Chinese marketplace, there is an estimated 1.3 billion people in China right now. If you could sell your service to just a small 1/2% of the population, you’d be a millionaire. That’s 6.5 million widgets sold of whatever it is you have.

Odds are that you probably could not reach that number of you tried. Even if you could, you’d need to sales force the size of the US to get to it. It’s not realistic and it sounds like a bunch of hot air.

Bottoms-Up Forecasting takes a more realistic and general approach to your sales figures. By estimating that you have 5 sales people on the floor, each making 10 calls a day to the 40 major markets in the US, you hope to sell 1-2 widgets per sales person per week. You now have a more realistic approach AND clear benchmarks for your sales staff to work against.

Have you ever been asked to try and contact 1% of China? Yeah, I think not. You would have better luck getting your start-up funded by Vince McMahon of the WWE wrestling organization. You seen the size of that guy? Much less his demeanor?!

As the CFO of iEnfluence, I am assuring that we have more realistic sales figures as well as more realistic forecasts. We know we can’t reach a majority of the market, but what we can do is use our existing technologies, whether it be LinkedIn, Facebook, Twitter, Plaxo, or any other social media site to help us spread the word. Also by doing this, we are showcasing the power of our product. These are our tools as well.

The iEnfluence strategy and product reach will allow us to creep in the smallest of places that other commercial companies have failed to reach for the past 50 years.

Our own footsteps will be the map for our own clients to follow. How many companies can say that?

Post by Jason Sanchez, CFO of iEnfluence

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