This transcript was generated from the episode audio and may contain minor errors.
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In the book "Side Hustle" from idea to income in 27 days, I published a back of the napkin spreadsheet template that you can use to forecast income in a new business. Or if you have a business idea for trying to think about what your next side hustle is, you can use this little template, super, super simple. It was meant to be this tool that anyone can use in a pinch. And in fact, a bunch of people have used it since then. Now that said, a listener, one of our side hustle school listeners came across this tool and has a question.
How do you forecast earnings for a project that doesn't yet exist? They're like, is this some kind of matrix riddle? Is this an existential exercise wrapped in a prescriptive nonfiction book that's meant to be helpful? Well, it is a good question, but there's also a good answer for it. In fact, being able to estimate or forecast some earnings for a new business idea, even without the data that you get from putting it out to market can be essential.
It can help you avoid mistakes. I'll tell you about one of mine and the answer here in a moment. It can help you decide between projects, lots of good things. And as I said, it's very simple. So let's talk about it.
How do you forecast earnings for a side hustle? That's the question coming up after this quick sponsor message. [Music]
Hey there, Chris. This is Samantha. And I read about the back of the napkin forecasting in the side hustle book, but I'm still a little uncertain of how you can predict income with a new business.
You don't know how many sales or customers you'll get. So how can you even estimate? I'm trying to decide between a few different ideas. And if I had a better idea of their income potential, it would help a lot. Thanks for any tips or advice you can give me with this.
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Hey, Samantha. All right, great question. So the key point here is the back of napkin spreadsheet template is meant to give you an idea of potential, okay? So yes, it's totally true that there's a lot of data you don't have before launch, but you can in fact still make some estimates. And what you wanna determine is, like the key question you want to answer is for this business idea to work, to be profitable and sustainable, what is required?
Like for it to be a success, however I choose to define it as a success, how many customers will I need? How many sales will I need? And at what price point? So you've got different variables there. And obviously if you can adjust one variable, the others adjust as well, right?
If you have a high price point, you need fewer customers. If you're selling something that's relatively low priced, you're gonna need more customers, more sales. So you just kind of put in some various numbers based on your best guess. Don't overthink it too much. Again, it doesn't have to be precise, but it's trying to answer that question of like, what does it look like for this to be a success?
'Cause then you're gonna be able to say, "Oh, how feasible do I think this is?" Perhaps compared to some other ideas, just like Samantha mentions here. One tip is to make three versions of it. And by the way, a spreadsheet makes this really easy. It's not like you're doing three times the work, but make three versions of the forecast to provide your best guess. And then a conservative or a minimum version, like if you're like, okay, if it doesn't work very well at all, but here is the minimum I would need for it to work.
And then the third estimate is like one in which your idea really takes off, like it exceeds your expectations. And the information you get from doing this exercise can just be very helpful in helping you make informed decisions. Now here's an example of where if I had done some basic forecasting with a tool like this, I would have had that critical information. In my early twenties, I tried to start a golf membership program for just $1 a person. Now, if you think that's a terrible idea, you're right.
It was a terrible idea. For some reason, I thought it was a genius idea. I don't know why. I mean, there was a little bit more to it, but basically it came down to like getting people in the door for a dollar a person. I also didn't know anything about golf, which might've been a clue that it wouldn't have worked.
But if I had been bothered to map it out a bit, just using this tool or something else, I would see like, oh, it's gonna be really difficult for this to be sustainable without hundreds of customers coming in every day. So that didn't work out so well. Now I charge more than a dollar for anything I sell, but I also do this basic forecasting ahead of time as well. So I think that can be very helpful. Again, it's in the Side Hustle book from idea to income in 27 days.
If you register the book on sidehustleschool.com, you get a free downloadable version of it. So I hope that's helpful to Samantha and anyone else out there. You can also make your own version of course, but this is just an easy to use template. We'll continue to feature listener questions and updates from listeners. Just let me know what's going on, what you're working through, what your idea is, how we can be helpful.
I so look forward to sharing these episodes with you every day. So I hope you'll join me again. My name is Chris Guillebeau, this is Side Hustle School. [Music]
- From the Onward Project.
