The Business Forecast
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The Business Forecast
http://www.turbocash.co.za/philip/GoodThings/150k-dl.jpg
Sourceforge provide independent download statistics. As of November 2005 over 150 000 downloads have been made off the Sourceforge site
Natural Growth of the project
The TurboCASH project grows by word of mouth. As more users find the value in the product they recommend it to associates. As more consultants join the project they recommend it to more users. The downloads drive the process. These increase historically by 5% per month. This is also reflected in the registrations.
Our downloads are served off the Sourceforge server. These are important partners to us. They make their money by selling advertising space around their web site. On their site we compete against 10 000 other Open Source projects to get the attention of their 1 Million members and an even greater number of visitors.
http://www.turbocash.co.za/philip/GoodThings/downloads.jpg
The Model
The Model of a business forecast for The Good Things Partnership is contained in a spreadsheet which can be downloaded at:
http://www.turbocash.co.za/philip/GoodThings/goodthings3.ods Open Office 2
http://www.turbocash.co.za/philip/GoodThings/goodthings3.xls Excel
can be viewed in HTML Format here:
http://www.turbocash.co.za/philip/GoodThings/numbers.html HTML
The Assumptions
Periods – We use the arbitrary periods of 6 months. This is the period over which we would raise a round of financing, implement a campaign and assess the results. The whole proposal works over 4 of these periods. As the current sate of the “Internet Bubble” is such an important factor, it would be speculative to forecast beyond this period.
Value per user – When you sell the entire ownership of the partnership or when you deal with a party wishing to transact with the Partnership, the Partnership is valued on the number of users using the program. This is a common practice in the Internet Business , the business is evaluated on the number of users. This number can vary on the transaction being concluded. These are some recent values in recent transactions
Skype - $ 40 per user Impi Linux - $ 200 per user Pastel Accounting - $ 300 per user (2003)
As the total number of users rises, the “Per user” value of the project also rises. So it is a fact that the same user is worth more as part of a bigger group. For this proposal TurboCASH users are valued at $ 100 per user.
Conversion Rate – The purpose of The Good Things Partnership is to raise funds for the specific purpose of getting new users. This is a very difficult number to quantify. It significantly effects the return on investment. If it costs us $ 100 to get a new user, then the investment will have low return. If it costs us $ 10 to get a user, then the return is phenomenal. This figure is speculative at the time of the writing of this document.
The figure of 6 users per $100 spent is is a conservative figure. When you consider the message of “Free” the conversion rate should be high. There are very few precedents for this. This number will become apparent on the few months of the project and will only remain an unknown for the first round of financing.
Natural Growth of the User Base – This figure is taken as 5% of the user base per month, approximated at 30% per 6 months. This is based on the historical growth of the user base over the last two years. Effectively there has been very little marketing and the User base has grown at greater than this rate. So 30% per in months is a conservative figure. TurboCASH monopoly position in this OS market is unlikely to change in the short term.
The value shares in the partnership, because not all partners have equal shares, is equal to the amount of shares that a partner has times the value for the company divided by the total number of shares held by partners.
(partners shares * value of company )/(Total shares issued)
The success of this partnership rests on expanding the user base faster that the financial input required by partners.
I know just like any spreadsheet proposal, only the “Great Outcome” is show, but using the above assumptions and following through on the logic, investors in the first round of financing make 20 times their return on investment if they stay trough to the end and we successfully conclude an exit. If they exit after the first round they make 2.5 times their investment in 6 months. If we try this and find that simply no matter how much money we chuck at it, users simply don't want to adopt TurboCASH then we sell out short and investors recover their money under the guarantee.
For investors in the first round of financing ($ 1 Million) to lose on their investment would require:
i)That the $ 1 million spend marketing has absolutely ZERO effect on the growth of the user base;
ii)That there is no further growth AT ALL in the current User registrations
iii)That the current user base of 25 000 has been overvalued at $ 1 Million.
Is this investment risk free? - Close.
Why raise finance at all?
I (Philip Copeman) and the current contributors to TurboCASH are in a very comfortable position. The TurboCASH project is self sustaining. With very little monthly expenses the project marches on. There are three scenarios in the goodthings3.xls model. The second one shows what happens of we simply “stay where we are”. In two years time we are forecasting a user base of 57 000. This will give us at, $ 100 per user, a company worth $ 5 Million. So given that there are in fact very few partners currently a the core of the project, we will not have to share this value with too many partners.
The current state of the Internet market, the undeniable attraction of the “Free” Message and the current Monopoly that TurboCASH has in Open Source Accounting market will not last forever. By bringing in external financing we can accelerate the growth of the user base and we can radically improve the “equity” value that the current contributors have. Further we can do that and still offer the investors a very good risk return option.
There are many Developers and parties wanting to fund development, to whom the GPL is restrictive. The Good Things Partnership will give them the opportunity to commit their resources to the TurboCASH project.
As long as we can “buy” the users, the market stays buoyant, then we are in the right place at the right time and this is the moment for bold action.
The Revenue Opportunities
This business forecast assumes ZERO revenue for the partnership. It basically outsources all revenue to the project participants. There should not be a problem with this. We want project participants. They are almost more valuable to us than revenue. The more project participants we have, the more the project grows.
We want to avoid the perception that what we are going to do is build the user base and sacrifice it to a commercial party once we have something worth cashing in. This is not what we are going to do.
As the user base grows the opportunity to make revenue off them rises. TurboCASH users are addicted to TurboCASH. It is not a casual program it is a mission critical application. If you use TurboCASH it is likely to be the major application that you use. Now this starts to have major implications. For example, if you purchase using TurboCASH then you get used to that method. If we link an external web application to TurboCASH you will find that you can use that web service without changing the way you operate. No new learning! That means that as project owners, we are able to significantly influence the way that TurboCASH users purchase!
Similarly the Workspace can be influenced by us. I am not saying that we pound the user with Pop up Ads, but certainly we are to promote certain banks, certain financial services, certain freight companies to the users. We rapidly move into media business.
The fact is, that as the user base rises these revenue opportunities become increasingly available. As owners, we get the opportunity to develop revenue streams that are unobtrusive and beneficial to the user base.
Simple products like training videos, CDs eBooks – all of these become easier to deploy and easier to profit from as the user base rises. The forecast for these products is zero, but they could amount to substantial profits.
The reason that we have a Zero revenue forecast, it that this investment is so promising, that it actually unnecessary to promise revenue on top of it! This would be a bonus. The overriding pressure is going to be to sell to a lagescale participant. The buyers will always have more use and more interest in acquiring ownership that the initial investors. They will invent the revenue streams. The early investors are likely to be sellers and profit takers.
Roadmaps
It must also seem strange to you that there are no “marketing plans" laid out in this proposal. How are we going to get these 1 Million users? It is not that there are no marketing plans, there are too many! We will grow our user base by associating TurboCASH with existing communities. So we will spend money on developing the technical interfaces and then we will spend money on developing the marketing campaigns that achieve the downloads conversions and registrations. The nature of who becomes our partners will determine the nature of our marketing campaigns. For example, if we taek on a large number of partners form Holland we are likely to develop the Dutch market etc.
We are still unsure whether the first subscribers to the investment will be a few large partners or many small investors primarily from the TurboCASH user base. Without an initial investment of at least R 1 Million, it would be preferable to keep the current ownership structure, with simple rapid decisions, we can have “board meetings on Skype and Webex” and the whole project can proceed as is. Assuming that we are able to get an initial investment that is substantial, and we can then take on further investments form smaller partners (we will have to write software to accommodate this) then we would want the investors to have a say in how they would want the investment dployed.
We will list a number of alternatives and give the investors a choice of how they best felt we should proceed.
Examples of this would be:
Marketing campaign by country Translation by language US invoicing system Manufacturing package Multi currency features Rental system Upstreaming Interfaces : Open Office, OSCommerce, Zen Cart, Vtiger, Sugar CRM, Plone Cms, php DEV interface. Downstreaming interfaces : Any Bank interested in integration, Government tax interfaces, freight systems, credit card companies, ECommerce Web sites. Commercial Software Interfaces : Quickbooks, SAGE, Microsoft. Linus versions Hardware interfaces : Point of sale devices; printers. Hand held devices, cellphone systems,
