Settings

Here are the settings that you can manipulate at this time:

1. Sales Confidence: Entering 125% will increase all your sales predictions (and thus anything driven by sales predictions, such as revenues, cost of goods sold and commissions) by 25%. Entering 80% will decrease your sales predictions (and thus anything driven by sales predictions, such as revenues, cost of goods sold and commissions) by 20%. This changes the effects of all your assumptions in your financial statements, but will not change the actual assumptions you entered. (This saves you from reentering data when playing what-if games).
   
2. Acceptable IRR for outside investors: The IRR that private investors (venture capitalists, angels, etc.) expect to receive from investing in your company is a function of many factors including the economy, investors' personal financial goals, investors' other investment alternatives, and investors' perception of how risky your endeavor is. It is a fact that most start-ups fail, which means there is a high probability that the entire investment will be worthless in a few years, so on the risk spectrum of investments, investing in your company is high risk. Simply put, if investors want low- to medium-risk, they should not be investing in a start-up. In return for taking the high risk, investors expect high potential IRR. After all, if the potential IRR were modest, investors would be much better off investing in something with much lower risk. So, what is a “high potential IRR”? After your assumptions have been pared down to ones that everybody agrees are realistic, investors are going to expect to see an IRR in your plan in the range of 35%-60% over one-year treasuries. That doesn't mean they will always get that high a return. After all, many start-ups they invest in are going to yield no return, and a few will yield much higher, but experience has shown that if investors and entre-preneurs agree to a set of business assumptions and those assumptions yield an IRR lower than that range, investors are not being presented with a deal worth investing in.
   
3. Expected corporate income tax rate. Once the company starts having cumulative positive earnings, it will have to pay income tax to the IRS. Enter here the effective rate of that income tax. Rates vary from 15% to 35%. 25% is a good guess.