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?
4 thoughts on “Startups Need Bottom-Up Forecasts”
this is gold!! I like what you said and taking it into consideration for a business a few partners and I are trying to start.
Very well written, simple and easy to use. I would like to know what factor you would recommend for word of mouth.