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Me: “Let’s see some guesses! I am excited.”
Analyst: “Okay, here it is. You should expect a break-even point in the 48th month. The cash flow required by then will be estimated at $50,000.
Me: “How are you?”
Analyst: “Well, you are building a market similar to Upwork or Fiverr, but focusing deeply on one niche. You are charging less than Fiverr and Upwork. You are trying to get a piece of their cake, with a tiny fraction of their marketing budget and almost non-existent branding. You will need time to get into the same universe.”
Let’s talk about some numbers. I won’t bore you with detailed projections, churn, expense, revenue, margin and every element of our financial model.
Q: How many years did you forecast your financial model?
Me: “If you are reading one of my articles for the first time, let’s complete the formalities. I am Al Anani, 10 years business consultant in Zurich, Switzerland. I’ve had several clients ask me to work with them on their financial model with only one question – how many years?
My answer to this is almost the same.
– Has your business existed for a very long time? A restaurant, for example? Then you can forecast it for ten years if you want.
– Are you working on something high risk and new technology? A blockchain SaaS solution, for example? I would forecast it for a maximum of three years. Some customers ask for a five-year launch. However, the truth is that the six-month estimate in such industries will almost certainly be wrong.
Given that I’m working in a technology product that already has a market, I’ve built up a three-year financial projection.”
The startup’s business model is a simple commission-based marketplace (similar to Fiverr and Upwork.)
Yet one of the competing edges is that it isn’t charging as much. They charge an average of 20% commission for intermediaries. We are charging ten per cent.
That’s all you need to know for the next part.
Based on extensive market research of the performance of Upwork, Fiverr, and many other freelancing platforms, our simple estimates based on bootstrapping and the three-year no-profitability concept are as follows:-
Advertising budget: $12,000Other costs (content marketing, SEO, and miscellaneous): $8,400 Orders expected: 100 orders (average ticket size: $500) Profit (10% commission): $5,000
Year 2 — (At the beginning of this year, the total profit is: – $15,400):
Advertising Budget: ~$15,000Other Costs (Content Marketing, SEO, & Misc): ~$8,400 Expected Orders: 500 Orders (Average Ticket Size: $750) Profit (10% Commission): $37,500
Year 3 — (At the beginning of this year, the total profit is: -$1,300):
Advertising budget: $30,000Other costs (content marketing, SEO, and miscellaneous): $16,800 Orders expected: 1000 orders (average ticket size: $1000) Profit (10% commission): $100,000
As mentioned earlier, this greatly simplifies complex models. However, the reader should understand the observation from the above numbers.
Anyone who says there are any guarantees in any business in our world doesn’t know what they’re talking about. Of course, there is a risk of failure. However, in addition to market research, this business operates based on a vision, “People will always need independent business consultants (which is where startups are).”
This vision is a startup’s gamble. This industry has existed for as long as we can remember, and it will continue to exist.
Artificially Intelligent Robots: “Will It Happen?”
Me: “I am one of those people who firmly believe that AI will be very effective in almost all industries in the near future, including this one. So, you may wonder – why is he wasting his time?
I am also a high believer in the fact that people always want, not need other people. For example, there might be an AI solution that creates the perfect business plan. However, it will miss the human element, which will always have a market.
Think of Jarvis’ AI when it comes to content writing. It has good quality, but it couldn’t make for a fictional role that is sarcastic or with so much imagination. You’ll always want to read what others are writing, even when AI writers dominate the market.”
“Sorry, a freelance platform is all about freelancers.”
This is a phrase that I cherish. I realized that anyone can market freelancers any day. However, getting talent is the challenge. Hence, for more than two years, we have been in stealth mode, training freelancers to ensure the quality of the products.
Google: “Just write things down correctly and post frequently, and I’ll put you on top.”
Me: “What if we do this and post very high quality content?”
The beauty of SEO is that it is completely people based. If millions of people are searching for the word you are presenting correctly to dominate the search bar, you are an instant success.
You can spend millions in advertising and outdo a simple blog that has written something valuable.
If you are thinking like this, then you have missed the point. I’ve been helping startups, and companies, have been raising investments for years.
They will have a simple objective and an exit strategy. The objective would be to obtain a growth chart the size of a hockey-stick and sell the business.
Here is something you should know. Not all startups have to be this way. It is not necessary to have a hockey stick for this. It doesn’t need to show anything. It may be more slide steeper than ever, only to fly.
The goal is not to become or compete with Upwork and Fiverr. If this is the goal, then these above estimates will not work. The plan would be something like this:
Build an AI-Powered Freelancer. raise billions. Outshine Upwork and Fiverr through a simple subscription model. Join and compete in the freelancing Game of Thrones.
The goal is not to revolutionize an industry, but to provide high quality, focused service with more competitive pricing. Some people want the job done quickly and would prefer to do it on Upwork or Fiverr, which is not a problem. This target segment is not the primary focus.
You can start a restaurant tomorrow that serves a trending drink or type of food. For example, say bubble tea. You will be using this trend to get into the market. Most founders will then focus on growing in different areas and products.
Most won’t focus on making the perfect bubble tea, which only a few will appreciate. Oh! That is the matter.
The focus is on growing right, making mistakes and enhancing the product rather than growing faster than ever. So, when an investor pops in by:
Investor: “Show me how I can get my 10x return in 2 years. make me understand!”
Me: “You won’t. Don’t invest. The focus is not on growth but on building the perfect product. Rather use a platform that can help you build a business that gives you 10x returns.
Again, not me. However, the remote and freelance work market has been here for a lot more than you might think. The concept of a single freelancer has always existed and will continue to exist. The benefits of freelancing are countless for one to believe that it will dissipate over time.
For the reader, simply, I urge you to have a purpose like this – to impress, help, get feedback, amplify and repeat, whether you are going for a hockey stick or a random chart.
I Am Al, a business consultant in Zurich, Switzerland. I believe in the power of providing value to you, the reader. If you are interested in the value of my content, follow me on various social media platforms.