How Doing the Simple Startup Math Helps Avoid OverwhelmGetting a handle on your basic numbers makes goals less abstract and keeps perspective on your progress.
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Pick a number to represent your startup's target sales for next month. Now let's say you sell your product for $100. Divide your target sales amount by $100. That's how many units you need to sell to reach your target sales.
Every entrepreneur needs to do this simple equation. Without it you are lost, with no path to attain your goal. This coming month the founders of Think-Eleven are launching their first Kickstarter campaign to fund production of the Lume Cube. They've set a fundraising goal of $55,000 to make the Lume Cube, the first technically versatile, external flash and continuous lighting experience for use with smartphones, digital cameras and GoPro, controlled through a Bluetooth connect IOS app.
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For any startup, $55,000 seems like a lot of money, especially when you are constrained by Kickstarter's suggested project timeline of 30 days.
Now pick a community you're a part of, whether your school, neighborhood or office. My university, for example, has just over 6,000 undergraduates. Dividing $55,000 by 6,000 people is 9.1 percent: I'd be successful if I could get just 9.1 percent of my school to support my startup!
This is the methodology every entrepreneur should use to breakdown the numbers behind their startup. Your numbers are important for these reasons:
1. Motivatation.
You need to face it -- starting a business is no easy task and it's an uphill battle. Entrepreneurs often lack or lose motivation as their business progresses. By breaking down the numbers behind your business, you'll realize your objectives are attainable.
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2. Put growth into perspective.
When you know your numbers, your goals don't seem so far stretched. $55,000 sounds like a solid amount of money, yet if you look at it like selling 900 units (Lume Cube sells for $59 on Kickstarter) then that number seems much more attainable.
3. Goal driven.
If you've set a number for your target sales, you'll now have a set goal you should be pushing to reach. Your target sales number is your long term goal while you should be setting short term goals to progress yourself towards your longer term one. You shouldn't expect to suddenly reach it, yet by taking steps on a daily basis toward this goal, it will become attainable. One step I take on a daily basis to progress my startup is posting compelling content on our social media pages. These simple actions add up.
Now that you have realized the importance of breaking down the numbers behind your startup, it's time for you to take action to make your idea become a reality. I suggest setting short term goals to reach long term goals. If you want to make $100,000 this year and there are twelve months in a year, start by breaking down your monthly goal. You'll probably start small, maybe you'll do $1,000 in your first month. Come December that $1,000 in sales can easily turn into $20,000 in sales. Once you realize the importance of breaking down the numbers behind your business, your goals will appear within reach.
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