This document provides guidance on creating financial projections and models for a new business. It emphasizes using a bottom-up approach by calculating projections based on key assumptions and market data rather than top-down industry averages. The document outlines steps for gathering industry reports, segmenting the target market, determining costs and team size needs, and providing an example projection for an acupuncture business targeting women in Miami that projects $48 million in annual revenue by year 5.

1. Revenue Models
The Founder Institute
Presented by: Nestor Villalobos

2. Common Mistake
DO NOT CREATE PROJECTIONS USING A
TOP DOWN APPROACH!!!!
ONLY CALCULATE PROJECTIONS USING
BOTTOMS UP

3. Pull Key Industry Reports
• IBIS, Hoovers, Dun &
Bradstreet
• Universities have Access
• Ask Other Businesses
• Ask Me

4. Financial Modeling (Con’t)
• Separate Key Assumptions Page
• Conservative Market Penetration Numbers
• 5 Year Projection Calculated Monthly
• Income Statement, Balance Sheet, Cash Flow
• Break Even Analysis

5. Gather High-Level Data Points
• Market Size ($13.9b)
• Avg. Net Margin (Profit/Revenue = 12%)
• Annual Growth (4%)
Industry: Alternative Health Care
Segment: Acupuncture

6. Market Segmentation
• Understand your Segment
• Don’t Calculate Market Size
Based on Totals
• Assuming Acupuncture =
3.6% of $13.9b = $500m

7. Industry Costs
• Profit
• Wages
• Purchases
• Depreciation
• Marketing
• Rent & Utilities
• Other

8. Modeling
Assumptions for Every $1m in Revenue:
•Profit = $119,000
•Wages = $493,000
•Purchases = $91,000
•Depreciation = $17,000
•Marketing = $54,000
•Rent & Utilities = $58,000
•Other = $168,000

9. Total Addressable Market
US Population = 322,267,564*
Total 30 – 69 Year Olds = 50.2%*
Total Women in Age Group = 80,566,000
15% of Women in the U.S. Have Bachelor Degrees*
84.7% of Women Do NOT Smoke*
Therefore about 10,000,000 women = TAM
*Source = Wikipedia

10. Revenue Projection
• Base Revenues DIRECTLY on Customer #s & Markets
• 10,000,000 Women TAM (All United States)
• Miami = 2.617m Residents OR 0.08% of Total Pop
• Target Market in Miami = 80,000 Women
• Average Acupuncture Price = $80.00
• Avg. Visits/Year = 2
• Total Miami TAM = $12,800,000 (2.5% of TAM $500m)

11. Team Size
• How to calculate team size & cost?
• Alt. Healthcare Industry = $50,0000 Rev. Employee
• For every $1,000,000 in Revenue Need 20 Employees
• Avg. Employee Wage of $24,960 = $499,200 for 20

12. Competitor Analysis
• Average Competitor Size: Revenue/Enterprises =
$63,960 average competitor revenue/year.
Means lots of small players in the industry.

13. Projections
Rev/Emp.
Sessions/Cust. 2 # of Emp. Yr 1 19 $50,629
Average Price $80 # of Emp. Yr 2 95 $50,629
Market Size $500,000,000 # of Emp. Yr 3 190 $50,629
Avg. Emp. Wage $24,960 # of Emp. Yr 4 379 $50,629
Total Customers 10,000,000 # of Emp. Yr 5 948 $50,629
Year 1 Year 2 Year 3 Year 4 Year 5
# of Customers 6,000 30,000 60,000 120,000 300,000
Cust. % of Tam 0.06% 0.30% 0.60% 1.20% 3.00%
# of Sessions 12,000 60,000 120,000 240,000 600,000
Rev. Mkt. Share 0.19% 0.96% 1.92% 3.84% 9.60%
Annual Revenue $960,000 $4,800,000 $9,600,000 $19,200,000 $48,000,000
Wages 49.3% $473,280 $2,366,400 $4,732,800 $9,465,600 $23,664,000
Purchases 9.1% $87,360 $436,800 $873,600 $1,747,200 $4,368,000
Depreciation 1.7% $16,320 $81,600 $163,200 $326,400 $816,000
Marketing 5.4% $51,840 $259,200 $518,400 $1,036,800 $2,592,000
Rent & Utilities 5.8% $55,680 $278,400 $556,800 $1,113,600 $2,784,000
Other 16.8% $161,280 $806,400 $1,612,800 $3,225,600 $8,064,000
Profit 11.9% $114,240 $571,200 $1,142,400 $2,284,800 $5,712,000
Assumptions Employee Planning

14. Angel Capital?
If seeking angel capital, due to risk/return need a “Hockey
Stick” projection achieving at least $20m in sales by Yr. 5

15. Contact Information
Nestor Villalobos
nes@nestorv.com
www.nestorv.com (LinkedIn)
www.nestorvillalobos.com (Blog)