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### Metrics Investors Consider: Quantitative Information for Early Stage Startup Forecasts

An important 22 for young startups: How do you attract investors with no track record who are confident in financing? Here are three tips to help you make the most of your available resources to close the deal.
Due to the very tight capital market in 2022, early-stage startups faced financial problems that became even more serious. To attract potential investors, especially those in a recession, developers need to provide evidence of good results. One way to achieve this is to make a lot of predictions, but with little financial history there are few metrics to support those predictions.
The good news is that strategies exist to overcome this challenge and create a complex situation. When implemented well, these steps not only provide reliable, financially supportive information, but also create a foundation for strategic information that will help developers improve their business.
I¤ has advised many startups on business development and fundraising. While venture capitalists are interested in business ideas, annual revenue estimates have been very important lately in terms of metrics such as cash burn and profitability.

### Start With Data Strategy?

Even in the early stages of starting a business, investors draw a line between revenue and the potential value of the company. For your company to be worth $1 billion, you need to be able to show up front that you can generate approximately $100 million in annual revenue over the next five to seven years. There are many ways to achieve this, but generally speaking, the greater the revenue growth, the greater the potential profit and the greater the value to the investor.
Companies need flexibility to grow quickly and achieve the annual revenue they desire. To do this, they need to be readable; This means that the information must be easy to study and interpret. You need to use metrics to establish principles to guide your operations and then incorporate those metrics into your business plan, financial model, and reporting as you move through the different stages of fundraising.
But I know no company has the resources to research and create these statistics, so every startup needs to easily create a database on the toughest metrics. That's why I recommend clients start with three important building blocks:
1. Business Analysis
2. Cost
3. Sales
Focus on you, how many measures the efforts of these three pillars will help you get Sellers collaborate and get the necessary foundation to evaluate the creation must be convinced.

### Market Research: Learn Your target Customers and targetted Industry

The first pillar you need to establish to generate revenue and form the basis of many good documents is market research. A deep understanding of the target market helps designers create a framework for forecasting sales and profits through meaningful comparative data. The information you collect will help you define broader goals and provide a foundation for pricing and other important financial metrics.
Even the simplest market research can produce great results for companies trying to achieve their goals. Identify their customers. Surveys of potential customers are an important source of useful and valuable information, and I use them a lot in electronic surveys and remote meetings. In-depth interviews with current company employees, suppliers, and customers can provide information you can use to develop company strategies to increase the most benefits. I generally avoid focus groups because I find them difficult to conduct without bias.
I also use market research to help companies create statistical information; This information is often included in reports and can help improve many aspects of the business, such as customer acquisition cost. For example, I helped an early-stage manufacturing company develop and prospect for potential customers, all of whom were established players in the industry. The survey collects a lot of information such as the number of employees and revenue, as well as positive responses that indicate the company's business is facing problems.
We encourage respondents to provide an anonymized copy of their answers to help them understand how they compare to other companies in their industry. Using the information we collect, we can help customers clarify the following key points about their business:
1. Customers derive value, an important metric for many startups
2. Customer lifetime value, i.e. Revenue Forecasts, provide insight
A company's operating margin, which helps determine how much capital to raise it's an investment that pays off for all parties: The company has met or exceeded expectations, developing Fortune 500 customers on its way to business success.

### Price: Create a price for your customers and get your fair share

The second leg of the startup's evaluation strategy is to use the most effective and efficient tools to increase revenue from sales. However, I have noticed that very few investors explore the various investment options available to them.
Pricing seems like a dark art. If you pay too much, you will lose customers. Pay too little and you're leaving money on the table and undermining your fundraising goals. Balance is difficult but you can achieve it.
First you need to know the concepts of value:
1. Added value: Calculate the value of the product or service and then add the appropriate profit Price competition: Your competitors or potential competitors to determine your bearable price
Use this framework to determine the right price for your product or service. (Each step is followed by an example of how the process works.)
1. Measure the dollar value your product or service provides to your customers. Will time, energy or both save them? Or how much money do they make from it?
Example: Using Sample Corp.'s widget, Buyers Unlimited has a X% chance of selling an item worth $A.
2. Determining your success by the percentage of customers who use your product and those who do not.
Example: Without Sample Corp.'s widget, Buyers Unlimited has a Y% chance of making a sale worth $A. Therefore, Sample Corp.'s widget is worth $B = $A x (%X - %Y) for Buyers Unlimited.
3. Multiply these two numbers by 20% for the lowest value and 25% for the highest value.
Example: Sample Corp. By providing widgets to Buyers Unlimited, you should earn between $B x 20% and $B x 25%.
To show the real example, let's - Some say buying Sample Corp.'s widget means Buyer's Unlimited is off 15 percent in one year. This means the widgets are worth 15% x $100,000 or $15,000 to Buyers Unlimited. So 25% of $15,000 would give you a high of $3,750, and 20% would give you a low of $3,000.
As the math goes, the higher the return on investment your product or service provides, the higher the price you can charge.
Paying customers correctly is as important as paying the correct price.
For many startups, especially in the technology sector, there are already some designs suitable for your business model. If your company wants to compete with the company's discussion or search engine, the standard is to offer free service to customers and make money from advertising. If you're building a streaming service, you'll likely follow the lead of other streaming services and adopt a freemium model, offering the lite version for free and hoping to sell more to customers at the cost of paying. The same goes for business-to-business models, especially software as a service, where the pricing model is often built around subscription services and users are connected as a whole.
While it is possible to take a different approach from your competitors, the truth is that the more competitive the market, the more difficult it is to differentiate it from its standards. However, the impact pricing approach can be a key differentiator in a competitive environment; so don't ignore it completely.
If you choose to follow the business model, you still have the opportunity to increase the revenue required by using the asking price, the competitive price and especially the price required to comply with these standards. For example, I worked with a client who was building a business around healthcare management. We created a discount tariff that includes not only the maintenance and administrative fee of the job, but also the consultancy fee for opening a new hospital, the money sharing fee for financing, and the fees for other hospital services.

### Sales channel: Track conversions and sales

Coming to the third and final post, I recommend that entrepreneurs generate predictable income by creating and optimizing metrics around leads and sales. This means creating the best sales experience. The sales pipeline allows founders, managers, salespeople, and investors to find enough customers at various stages of the company's sales process. You can create a revenue forecast by estimating the probability of converting a lead into an actual customer based on its level.
Conversion data is particularly powerful from a business perspective. Using this information, you can estimate how many new leads you need to generate in a given period of time to reach your annual revenue.
You can build your sales pipeline using spreadsheets, but I recommend investing in customer relationship management or CRM. Simply put, CRM is a tool for managing a company's customer relationships and managing phone calls, presentations, etc. It is an application that includes various tools used to track interactions such as activities. CRM is one of the most accurate information about your customers; It is your one-stop shop for sales management and lead information. It's important because it allows your company to collect information about its relationships as it grows and organize that information internally. These features can give you a greater flow of information than a report can – I like to say that a CRM gives you a 3D view, whereas a spreadsheet is only 2D.
At one end of the price spectrum there are many vendors with many options, such as Salesforce, which serves large enterprise customers. On the other hand, there are many finance-focused platforms like HubSpot, and their entry fee makes them especially popular among growing companies.
When you implement CRM, you can transfer data about potential customers to your sales channel. While the larger goal is to generate important metrics for investors, such as referral rates and revenue forecasts, the app can also be used to provide operational information such as electricity sales and switching costs at all levels.
This information can also be used to estimate customer acquisition costs and customer lifetime value; this, with the help of your business group, can inform your overall conversations about finding and selecting your business customers.
My experience working with early stage startups is shared here. Although the creator is the best-selling product, the company's CRM is important, with the sale of a simple app and contact information for others. My first step was to upload all of this information into a single platform at HubSpot. We can then elevate this to a sales cycle builder and create a sales pipeline that clearly lays this out in the customer relationship funnel. This allows it to calculate its revenue forecast more efficiently and accurately.
To improve your sales process, remember that every stage must clearly reflect the sales process, from communication and direction to rigor, solidity, agreement, discussion and results. You can then assign different values ​​to each stage or transition. Most CRMs can do this, but I usually adjust forecasts using historical data. I also try to make the best predictions possible. Your chances of conversion will increase as you move into the sales phase.
Using more than one CRM system and creating a process are two important steps to creating an annual revenue forecast that attracts investors. There are two reasons to invest time and effort into creating reliable sales metrics: The first is the good data it will produce, and the second is the search for returns. I tell my early adopters they should spend about 200 hours on the process, with the first 100 hours spent on generating more revenue than expected and creating other significant results, and the second 100 hours investing in communications and support. . This is a big investment of time and resources, but in my experience, it makes the difference in getting paid four times while increasing the amount of money received by five times.
Quantitative without guessing Strong financial track record is difficult but achievable. Ultimately, if you put in the effort, you'll not only improve your fundraising but also set your business up for growth in the years to come.

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