How can I know how big we can get?

Dear Aunty B,

I have started my new business and so far so good – touch wood! But I have a question. I am doing some longer term planning and have to answer the question – how big can we get?

How can I work it out when I don’t know where we will be in five years time?

No idea,
NSW

Dear No idea,

Well, if we knew that buddy, we would start looking into our crystal ball before we bought shares. Having said that I am here to attest that you can do a business plan and incredibly, three years later, pull it out of the drawer, dust if off and marvel at the fact that most of it actually happened and better still, worked!

I am sure there are scientific ways to do this but try this. Get an envelope and turn it on its back. Write a number on it. What revenue do you want to have in five years time? Now work backwards.

Write down who your current customers are. Imagine you keep selling to them and triple the price of those contracts as you provide better services and more products. Then you have your light bulb moment: you can’t make that revenue figure through your existing strategy.

You start to think about expanding your products geographically, through different channels and into different market segments. And you know exactly the type of customer you are looking for: the type that has already bought you success.

Then you figure out how many “types” there are and what proportion of them have an urgent need for your product and will pay the price that will guarantee you a profit. That then is your revenue.

It’s not perfect but neither is my share portfolio.

Good luck!
Your Aunty B

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