Crunching Away with the Calculator
If you’re like me, you always have a calculator by your side. Math homework and grueling calculus exams aside, the calculator has become a trusted friend over the years. Calculators are great for entrepreneurs in many ways, especially when it comes to playing around with numbers and figures of your startup. Fun stuff, I tell ya.
How much is that startup making?
I like to play a guessing game and experiment with numbers to try and figure out how much revenue and profits various internet companies make. It’s pretty fun and gives me ideas of how to charge for services that I have in the pipeline.
Today, I came across an advertising network that charges just over $5,000 per month for each ad. I was wondering how much the network owner was making by setting up all these great sponsors for this network of sites. I played with some numbers and started hypothesizing and came up with around $13,000 per month for the owner of the network.
I simply took the total number of sponsors on the network and multiplied that by the amount of sites in the network displaying the ads, then thought of a number that I would have personally charged as a revenue share between the participating sites of the network.
You should try it! Yeah, the next time you come across a site making some cash, bust out that calculator and start playing around with numbers. You’ll gain an insight into how companies are making money and it’ll give you plenty of ideas of how to charge for your services.
How much do I need?
The calculator is also great when trying to figure out how much you need to create a service, especially if you belong to the school of Bootstrappers (every penny counts).
For my first business I played around with numbers of how much I could get if I sold my car, took out loans, and borrowed money from family, among many other things.
Believe it or not, when you’re actually sitting there with a calculator in your hand and you’re looking at the numbers adding up, it may inspire you to become even more creative when figuring out how you can raise more capital or cut costs for your business.
1..2…3…4…
You got it – just crunch those numbers and see what you can come up with. Have fun, experiment, and think about ways you can shape numbers to help create your business, save money, come up with payment models, and all that good stuff.
Crunch on!
Dave,
Couldn’t agree with more. This is why I’m a big proponent of business plans. My feeling is that without putting together some type of financial analysis, a lot of entrepreneurs, especially inexperienced ones, tend to just dive into their business without really analyzing the figures. Important questions to ask:
“How much are my competitors making?”
“How much will it REALLY cost me to start up?”
“How much will it cost to sustain the business monthly and annually?”
“How much realistic revenue can I pull in the first quarter, year, etc?”
These may seem like obvious questions, but far too often, entrepreneurs tend to breeze past them, thinking they already know the answers. But once a true analysis is done, the answers nearly always turn out to be very different.
Use a combination of stats, common sense, foresight, and a calculator, to really find out what you need to do to start & grow your business the way you always imagined. If you aren’t realistic in your expectations & calculations, you will just end up being disappointed down the line.
- Anthony