Projections are the blind canyon of startups. A mythical pit of numbers that mean very little in the initial stages. There’s nothing wrong with saying they are guesses as that’s exactly what they are.
The honest truth is this, no one has a baldy notion what your startup is going to be making in year 5 (Y5). Investors like to see year five as it shows you’re in the for the long haul (well that’s if the VC’s don’t take over the board and throw you out but that’s a different matter).
Y5 is total pie in the sky stuff. The best advice I ever got was to just concentrate on Y1. What do you want to make and how the heck are you going to do it. It might not impress the angel/VC much but it’s a lot more honest. You might want growth of 50% every year on top the previous years revenues. As history has recently pointed out in 2007/2008 no one really has a notion of what’s around the corner.
Bootstrapping has the upper hand here. The only person you’re at the mercy of is yourself. You need to ask yourself these two questions…
1. What does [insert your business name here] need to make in Y1 so I can easily pay the bills and not sweat?
2. What would [insert your business name here] want to make in Y1?
Two very different questions with hopefully two very different answers. From there it’s easy with a spreadsheet, either divide the number by 12 months or 48 weeks (yes 48, you need a holiday too remember), targets for the month/week sorted out. Now it’s just a case of make it happen.
And I know you’ve heard this line a 1000 times before in the books but in 2011 it’s basically mandatory, “turnover is vanity, profit is sanity but cash is king“.