Back Of The Napkin Business Model

Finance allah shmoop what Our financial projections Well they're guesses

okay educated guesses we presume data is assembled reviewed and

then a crystal ball is gazed into And while projections

are made in the case of mature companies with long

cycle businesses the projections are often extremely educated and accurate

Yeah think about boeing's projected jet engine sales Well the

company takes three to four years just to set up

a fabrication run of a new style of engine and

they're working with rolls royce to do it Rolls royce

makes jet engines along with cars Their orders come in

and while they were partly paid for already and the

company knows it will produce somewhere between two hundred two

hundred fifty engines next year two hundred fifty two three

hundred engines following here and three hundred three hundred fifty

engines the year after that And yes there is some

variability and revenues But if the company produces fewer engines

well they'll have fewer costs as well So the range

they predict for profitability is pretty narrow That is they'll

have operating profit somewhere between eighty and ninety million bucks

each year Going up a little bit the next few

years That's The financial projection anyway can a bomb go

off in the factory or rather someone is smoking around

the fuel depot and then you know glam Yep that

can happen Is it likely No but it can And

it would really throw off the projections Right So projection

Is just a projection it's not a guarantee it's a

guess with other companies while like much younger ones projections

are well way more of a guess At the other

end of the rainbow from the boeing rolls royce jet

engine thing there's a brand new company just called rolls

it's an e bike company with assisted pedaling so that

riders feel like they're somewhere between superman and lance armstrong

You know the steroid guy company has had early success

having sold two thousand bike models off their website for

two grand each they're about to raise twenty million dollars

in venture capital funding Tio go big so now the

projections get really vague Will the company sell a million

bikes in three years Well that's what the founders think

but they're enthused and young for the company only sell

ten thousand bikes in three years Sure if they meet

the former projection they're billionaires If they meet the ladder

they're bankrupt Either way they can project with certainty that

their outcome begins with a b generally speaking the more

mature the industry and product the narrower or more accurate

the financial projection with startups who have no history Well

one never knows if they're projecting growth in the future 00:02:43.065 --> [endTime] like google or shmoop Come on