Me: “Let’s see some projections! I am excited.”
Analyst: “Okay, here it goes. You ought to expect a break-even point in the 48th month. The cashflow needed till then will be an estimate of $50,000.”
Me: “How come?”
Analyst: “Well, you are creating a marketplace similar to Upwork or Fiverr but deeply focused on a niche. You are charging less than Fiverr and Upwork. You are trying to obtain a piece of their cake, with a tiny fraction of their marketing budget and almost non-existent branding. You will need time to get in the same universe.”
Let’s talk about some numbers. I won’t bore you with detailed projections, churn, expenses, revenue, margins, and every element of our financial model.
Question: “How many years did you forecast your financial model?”
Me: “If you’re reading an article of mine for the first time, let’s do the formalities. I’m Al Anany, a 10-year business consultant in Zurich, Switzerland. I’ve had numerous clients who asked me to work with them on their financial models only to ask the same question — How many years?
My answer to this is almost the same.
– Did your business exist for a very long time? A restaurant, for example? Then forecast it for up to ten years, if you wish.
– Are you working on something with a higher risk and new tech? A blockchain SaaS solution, for example? I’d forecast this to a maximum of three years. Some clients ask for a five years projection. However, the truth is, in such industries, a six months projection will almost certainly be inaccurate.
Given that I am working in a tech product that already has a market, I’ve constructed a three-year financial projection.”
The startup’s business model is a simple commission-based marketplace (the same as Fiverr and Upwork.)
Yet one of the competitive edges is that it’s not charging as much. They charge, on average, a 20% commission to be the intermediaries. We’re charging ten percent.
That’s all you need to know for the upcoming part.
Based on extensive market research of the performance of Upwork, Fiverr, and several other freelancing platforms, our simple projections based on a bootstrapping and a three-year no profitability concept go as follows:-
- Advertising Budget: $12,000
- Other Costs (Content Marketing, SEO, and Miscellaneous): $8,400
- Expected Orders: 100 Orders (Average Ticket Size: $500)
- Profit (10% Commission): $5,000
Year 2 — (At the start of this year, the total profit is: -$15,400):
- Advertising Budget: ~$15,000
- Other Costs (Content Marketing, SEO, and Miscellaneous): ~$8,400
- Expected Orders: 500 Orders (Average Ticket Size: $750)
- Profit (10% Commission): $37,500
Year 3 — (At the start of this year, the total profit is: -$1,300):
- Advertising Budget: $30,000
- Other Costs (Content Marketing, SEO, and Miscellaneous): $16,800
- Expected Orders: 1000 Orders (Average Ticket Size: $1000)
- Profit (10% Commission): $100,000
As mentioned earlier, this considerably simplifies a rather complex model. However, the reader should grasp the overview from the above numbers.
Any person who says there is any guarantee in any business in our world does not know what they’re talking about. Of course, there is a risk of failure. However, aside from the market research conducted, this business operates based on one vision, “People will always need freelance business consultants (which is the startup’s niche.)”
This vision is what the startup’s gamble is all about. This industry has existed for as long as we can remember, and it will keep on existing.
Artificially Intelligent Robot: “Will it, though?”
Me: “I am one of the people who strongly believe A.I. will be pretty dominant in the near future in almost all industries, including this one. So, you could think — why is he wasting his time?
I am also a high believer in the fact that people will always want, not need, other people. There might be an A.I. solution that creates the perfect business plan, for example. However, it will miss the human element, which will always have a market.
Think of Jarvis’s A.I. when it comes to content writing. It has good quality, but it couldn’t create an imaginary roleplay that is sarcastic or with such a degree of imagination. You will always want to read what others are writing, even if the A.I. writer is dominant in the market.”
“Sorry, a freelance platform is all about the freelancers.”
This is one phrase I cherish. I realized that anyone could create a marketplace of freelancers any day. However, obtaining talent is the challenge. Hence, for over two years, we have been in stealth mode, training freelancers to ensure the quality of products.
Google: “Just correctly write things and post frequently, and I will put you on top.”
Me: “What if we do that and post very high-quality content?”
The beauty of SEO is that it is entirely based on the people. If millions are searching the word you have been correctly projecting to dominate the search bars, then you are an instant success.
You could spend millions in advertising and get outshined by a simple blog that just wrote something valuable.
If you’re thinking this way, then you missed the point. I’ve been helping startups, and companies raise investments for years.
They’d have a simple objective and an exit strategy. The aim would be to obtain that hockey-stick-shaped growth chart and sell the business.
Here’s something you should know. Not all startups are supposed to be this way. It does not have to be a hockey stick. It does not have to look like anything. It could be a slide steeper than ever, only to end up flying.
The goal is not to become or compete with Upwork and Fiverr. If that’s the goal, these above projections do not work out. The plan would be more like this:
- Create an A.I.-powered freelancer.
- Raise billions.
- Outshine Upwork and Fiverr through a simple subscription model.
- Get into the freelancing game of thrones and compete.
The goal is not to revolutionize an industry but to provide high-quality, focused service with more competitive pricing. Some people would want quick work done and would prefer doing that on Upwork or Fiverr, which is not a problem. This target segment is not the primary focus.
You could start a restaurant tomorrow that serves a trending drink or type of food. Let’s say bubble tea, for instance. You’d be using this trend to get into the market. Then most founders will focus on growing into different areas and products.
Most won’t focus on creating the perfect bubble tea that only a few would appreciate. This is it.
The focus is on growing correctly, making mistakes, and enhancing the product rather than growing faster than ever. So, when an investor pops by:
Investor: “Show me how I will make my 10X return in 2 years. Convince me!”
Me: “You won’t. Do not invest. The focus is not on growth but on creating the perfect product. Rather use the platform yourself to help you in creating the business that will get you a 10X return.”
Again, I don’t. However, the remote and freelance work market has been here for more than you’d think. The concept of a solo freelancer has always existed and will keep existing. The perks of freelancing are countless for one to believe this will perish in time.
For the reader, simply, I urge you to have such an aim — affect, help, get feedback, enhance, and repeat, whether you are going for the hockey stick or a random chart.
I’m Al, a business consultant in Zurich, Switzerland. I believe in the power of delivering value to you, the reader. Follow me on various social media platforms if you’re interested in the value of my content.
Author: Al Anany