Sales Reps Projected to Earn Too Much
When you’re first starting out, it’s hard to know how much to assume you’ll make. Here’s a tip: Don’t assume $1MM per sales rep. If your sales rep can close $20K for each deal, they would need to close a deal each week to keep up, which is unreasonable given the lack of infrastructure and ramp time. From a series of financial projections tips given in a Medium post by VC Blake Koriath:
Adding New Metrics
At this point, the metrics needed to track everything important to a startup’s progress have already been invented and standardized. But what if you need to differentiate yourself? Say, if you’re a freelance placement agency, and the high quality of your workers sets you apart from the competition? Y Combinator’s Sam Altman weighed in on just that scenario, in a consultation with two founders that was featured in a recent New York Times profile:
Miscalculated Monthly Recurring Revenue
The MRR metric can be tough to get right, but there are just two ways to calculate it. The first way is on a customer-by-customer basis, which Elizabeth Kraus explains on the Mergelane blog: Thomassen now said, ‘We of course want to talk about quality, because the quality of our freelancers’ work is our differentiator. We need a metric to measure it, somehow.’ Altman replied, ‘Repeat use or customer retention will track that. You don’t need to invent some complicated new metric, so don’t.’” So what’s the other way? Averaging out the customers. Again from Kraus:
Gross Margins Over 90 Percent
Koriath offers one more tidbit in his list of financial projections and their pitfalls: [For example] If Company X has 30 customers paying an average of $100 per month, its Monthly Recurring Revenue would be equal to $3,000 per month.”
