Saturday, February 6, 2010

Bottoms Up vs Top Down Rev Forcasting

A hi-tech startup operated for about two years on $2M funding. It developed extremely aggressive revenue projections for their second round funding. Their strategy was based on examining the potential market sizes and assume certain percentage market share for the company thus resulting in huge revenue growth projections. Potential venture capital investors did not believe in the financial projections and did not invest in the company.

Advised the Company to abandon the "Top Down" method of revenue projections and use the "Bottoms Up" method. Individual products and services need to be laid out with detail timeline for development, production, marketing and sales processes. Detail prospective client strategies must be planned, and phased in with the product availability to produce credible revenue projections.

Adopting the "Bottoms Up" strategy into a revised business plan reduced the financial projections by approximately 70%. The new numbers were viewed to be credible by venture capitalists and several million dollars were invested into the company which then was acquired two years after the second round investment.

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