Need help with calculating something for a business plan

[sbjc23]

Hi guys/girls,

Coming up with a business plan for my business, and cant figure out how to solve this problem and need a brilliant Math brain. Issue is this...

I know how much TOTAL revenue will be brought in after spending x amount of marketing dollars...there are estimates on ROI for that kind of stuff out there so that can be easily calculated. The issue is that I have 4 different products that we're selling at different price ranges...and that makes it difficult to calculate the total number of each product we will be selling....given the total amount of revenue we'll generate.

I do know that for every 100 pieces of business sold, we expect 44% of those products to be Product A, 48% of those to be Product B, 7% to be product C, and 1% to be Product D.

I think that gives me enough information to estimate the total number of each product we can expect to sell....given the total revenue being brought in already being defined...but after racking my brain for 6 hours...I cant seem to find the solution. Any help out there?

 

[tkhunny]

Well, beware the error of somehow averaging the ROIs. 0.44ROI1 + 0.48ROI2 + 0.07ROI3 + 0.01ROI4 probably is not a good measure, although it may prove a useful reasonableness measure, since auditors probably can understand it better.

What sort of shelf lives have the various products. It matters. If you plan to sell Product A for 3 years and Product D for 9 years, you will need to include all nine years, but the first three will be very different. You will also have to decide what to do after Product A drops out. Will you invent a replacement or just let your business start to drift into oblivion? Notice, if you just let Product A disappear, your distribution of business changes for the three remaining products. 44, 48, 7, 1 ==> 85.7, 12.5, 1.8

Percentage of pruduct just isn't enough information. You need real magnitudes.

Example: 75% Product 1 with 8% ROI and 25% Product 2 with 12% ROI. We might naively think 0.75 * 8% + 0.25 * 0.12 = 0.09. That
MAY be what you want, depending on how you measured 75% and 25%. Count? Total Revenue? Profit?

In other words, you'll have to flesh out your plan quite a bit more. There are many, many ways to go. Unfortunately, the best way to go is the way that makes the most sense for the way you do business and the way you think about what you see on a Balance Sheet or an Income Statement.