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| | | KinderFodder
 
Group: Forum Members
Last Login: 4/16/2006 3:56:51 PM
Posts: 9, Visits: 13 |
| | How should one go about writing a business plan for a web2.0 company where we only show outflow of money and no inflow. In financial section, we show only costs incurred. How should one convince an Angel investor or Venture capital on the value created by network? |
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SophomoreFodder
Group: Forum Members
Last Login: 3/28/2007 8:52:56 PM
Posts: 144, Visits: 434 |
| | The big thing in any business plan is to show how you are going to make money. If all you can show is outflow without a way to surpass that in cash inflow your going to have a big problem. If your a web 2.0 website then you should detail the amount of ad inventory (how much money you would make if you sold every ad slot on your site), the expected sale rate (we expect of sell 5% of our ad inventory the first year and increases that by 3% each additional year), the price structure (including allowable discounts) and subscription fees if you have any. The big thing about banner ad revenue and CPC (AdWords and such) is that it is directly tied to traffic. So if you are trying to calculate the total inventory on a standard RoS (Run of Site) sales model you will have to multiply your CPM by the number of PAGE VIEWS (Not visitors) for each page visited. That means if you have a CPM of $10 and you have 3 ad slots per page and you have 1000 visitors a day with an average page view of 6 pages per visit you will end up with a total DAILY revenue of $180. Then you just need to show that you can scale for 1000 users per day to 10,000 users per day adn you have a decent revenue stream of $1,800 or $65,700 per year. Not venture worthy but still a nice lifestyle business. If you want to be venture worthy you need to show how you are goign to get to 100,000 vistiors per day, increase the number of page views or show how you can justify a higher CPM. Hopefully all three.
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Fodder Chief
Group: Administrators
Last Login: 3/4/2008 5:30:47 PM
Posts: 179, Visits: 845 |
| This is a really interesting question.
I think a lot of business plans make a mistake by assuming they can grab a certain percentage of a massive market. Then, all they have to do is scale it. If you can get 1% of a $10B market, why not 2%? Or 5%? And so on.
It just isn't that simple, and a sophisticated investor will see through that.
Ben |
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| | | KinderFodder
Group: Forum Members
Last Login: 4/16/2006 3:56:51 PM
Posts: 9, Visits: 13 |
| | I do agree to that. Here I want to keep the site ad free to some extent atleast during first year of operations till the product stabilizes. As it is web2.0, we do not charge user for the usage. It is the network and kb we build that matters. On the similar thread, there was talk about $30 / per user valuation. Can I just talk about the network as value in the business plan? |
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Fodder Chief
Group: Administrators
Last Login: 3/4/2008 5:30:47 PM
Posts: 179, Visits: 845 |
| Here I want to keep the site ad free to some extent atleast during first year of operations till the product stabilizes. As it is web2.0, we do not charge user for the usage. It is the network and kb we build that matters. On the similar thread, there was talk about $30 / per user valuation. Can I just talk about the network as value in the business plan? I have not seen the business plans for major Web2 deals, but I expect there are a couple ways you could approach this that would make sense to potential investors. First, consider charging for the service. If you keep the service free for the first yeat at get 1MM users signed up, and then put a fee structure in place, you just need a user conversion percentage. If you charge $10 per year and 10% switch to paid, that is $1MM in revenue. Ryze took this route -- it's free to join, but account upgrades get you more features. The Motley Fool is a free content site, but if you want to participate, you have to join their forums. Second, advertising. If you have 1MM users who produce 100MM ad impressions per year, and you get a 1% CTR, that's 1MM clicks. At an average of $0.25 per click, that is $250K. This post kind of puts this "$30 per user" stuff in perspective. Ben |
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Fodder Chief
Group: Administrators
Last Login: 3/4/2008 5:30:47 PM
Posts: 179, Visits: 845 |
| | Also check out this article. Web 2.0: The new Internet "boom" doesn't live up to its name. It sheds some light on what exactly Web 2.0 is (gee, surprise, it's hard to define) and touches on an investor's perspective. How does everyone feel about this? I realize there are some cool Web 2.0 properties out there, but I am seeing so many "it's MySpace, just in a different industry" deals out there that I'm instantly sceptical and dismissive when I hear "MySpace" or "Web 2.0." Thoughts? Ben |
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SophomoreFodder
Group: Forum Members
Last Login: 3/28/2007 8:52:56 PM
Posts: 144, Visits: 434 |
| | There are a ton of social networking sites out there; and some vertical specialization is good. I do think there are to many "me too" companies out there thought. It is a killer app when you add it to a vertical portal though. One stop shopping for you specified tastes. Give me a baking site with recipes and a specialized search engine, some chat rooms and a way to connect with other chefs and you have a golden ticket. It's just hard to do community "right".
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Fodder Chief
Group: Administrators
Last Login: 3/4/2008 5:30:47 PM
Posts: 179, Visits: 845 |
| | ...and here's a rebuttal of the Slate article for good measure! |
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KinderFodder
Group: Forum Members
Last Login: 12/25/2007 9:49:42 AM
Posts: 7, Visits: 6 |
| | Hi, A business plan is a good first step. It is 100 times harder to start any business without a business plan, compared to having a good one in place before starting. I regularly advise clients and clients to be to begin by writing up a business plan before spending any money or investing anything in a business. Look at it this way. A lender will want to see that plan before lending you money. A building owner will want to see it before agreeing to lease facilities to make your business happen. Any seasoned investor will want to review it before investing with you. I am a commercial agent that can assist anyone starting a business or investing in a commercial venture anywhere in the USA. Your investment has to include commercial property of some kind, even if it is a business, a new startup idea, or other. There are many ways to passively or actively invest in commercial properties of all kinds. I am also available to help your organization move into bigger space, move into smaller space, expand, or sell our existing facilities anywhere in the USA My network of 4000 commercial agents that I work with at Coldwell Banker Commercial stretches all across the USA. I specialize in helping people find a good commercial agent that can assist them in reaching their goal, no matter what it is. Make sure that if you do sell any commercial or investment property, that you exchange it, instead of just selling it. This will save you about 25% of your investment gain in taxes. Feel free to check out my website. It has articles, RSS feeds, and news as well as reports about the latest cutting edge developments in commercial real estate all across the USA. www.ericstraatsma.com
ERIC STRAATSMA MS
MILI Group Inc.
Creating & Protecting Wealth
2033 Howe Ave Suite 160
Sacramento CA 95825
Office 916-286-7930
www.aaawealthbuilder.com
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