When I did the initial revenue analysis for one of my former sites, The FireStar Institute, the goal was $8,333 a month. I knew that it would be a monthly subscription site and wanted to price it, so that anyone wanting to learn how to run a business could afford it. I chose $29.95 a month. If there were no expenses, I would need 279 members to reach my goal. I also knew that since it takes one to two weeks to properly research and write each course (80 to 100 hours), plus the time to code and maintain the web site.
This didn't leave any time for any substantial marketing program in my schedule. I could hire a bunch of people to do it for me, but most small businesses start on small budgets and that didn't sound feasible. So, I decided to add an affiliate program. Not only would that provide some of the best advertising in the world (people who understand what I am offering), but it would provide my students a way to pay for their own education. Based on industry standards, I have decided to pay $8 per referral. That brings my gross profit down to $21.95 a paid member. With this revision, I would need 380 members to reach my goal. Considering the size of the Internet marketplace and my person-to-person research, this is certainly an achievable revenue target.
- Goal: $8,333 a month
- Price: $21.95 per member
- Students: 380
- Actual: $8,341
While these examples are simplified, they demonstrate that you should not do this just to run the numbers. It will also help you define your business and stretch your creativity. Once you add your operating and other expenses to your analysis and have demonstrated it can be profitable, it is time to create a more formalized business plan.