Startups Need Bottom-Up Forecasts

A startup last week told me their goal was 100,000 active users in three years. Great, I told them, that sounds like a nice round number. Then, I asked where the number came from. Naturally, they pulled it out of the air with no basis. Wrong, I told them — a bottom-up forecast is the way to go.

Here’s how a bottom-up forecast might look:

• 1% conversion rate from unique visitors (so, 100 visitors to get one user)
• Publish three blog posts per week with 100 unique visitors per post (so, three users per week)
• Send two tweets per day with 50 unique visitors per tweet (so, one user per day)
• Earn one PR placement per month that drives 5,000 unique visitors (so, 50 users per month)
• Assume this is constant for one year and you have about 1,100 new users (~150 + 365 + 600)

With this brute force inbound marketing approach it’s going to take a significant amount of time to reach 50,000 users (note there’s no word of mouth, viral co-efficient, etc).

Startups needs to do bottom-up forecasts for sales, users sign-ups, etc to better understand what it takes to be successful.

What else? What do you think of bottom-up forecasts?