I want to tell you about a problem that is extremely widespread and it's this: the use of bullshit numbers.
As a startup lawyer, I can't tell you the number of times I've heard things like "We project sales of $XX million after Year 1," "We expect a return of XX," "We anticipate to capture X% of the market after year 1;" etc.--and NONE of it makes rational sense.
I hear this type of talk over and over again. There's so much wild conjecture it's ridiculous. Here's a hint though: you're not fooling any one.
The best investors and entrepreneurs don't do this.
I've actually noticed that this problem is more widespread in IT startups than energy tech startups in Texas--you can probably surmise as to why but nonetheless the problem exists in both sectors. So instead of using nonsensical numbers, here's what you should do when it comes to projects:
1. Use your historical data
Look at what your company has done and see how that projects out. If your company hasn't done anything yet, then don't just use made up numbers. Be grounded in reality.
I've seen founders say that they're going to do X amount of sales, but they don't have: (a) a demo completed; and (b) any basis in those numbers.
2. Use comparables
Always, always use comparables. Look at what other companies are doing that are similar to your company. No company is going to be exactly like yours. That's fine. See how those companies are similar or different from your company. Yeah, that data can be hard to get, but get what you can.
3. Look at industry trends and established means
There are various industry groups and think tanks and such that study industry trends. They often release data and studies that show what kinds of numbers players in that industry are making.
There are also established means of how to calculate such numbers in certain industries. You don't necessarily need a professional to do a valuation on certain matters, but you can definitely see what kinds of methods they use to figure out projections.
4. Be able to back it up
The best thing you can do in a meeting or a negotiation is to be able to BACK it up. If someone questions you on your data, then you want to be able to say, "Well, let's look at this. First off, this company did X amount of revenue and is similarly placed in the industry with us. This other company did this. Industry studies have shown this. Our company is different however so we anticipate being able to beat the trend." Being able to do this is powerful.
Know this kind of material like the back of your hand and use it to your advantage. In other words--do your homework.
Let people know why your numbers make sense. Don't be shy about this. If you can back your data up that lends a credibility to you and your project that others don't have.
5. To quote Melania Trump quoting Michelle Obama: "Your word is your bond."
Integrity and sincerity are everything. Take what you're saying seriously. If you say that your project or that your company is going to have revenue of $XX million by end of year 2, actually MEAN that. Yes, it's an educated guess, but mean it with sincerely. It's the best way to do business.
As I've said before, entrepreneurs are optimistic and I would be wary about one that wasn't on some level optimistic. But at the same time, remember to be reasonable. It's important and it's a type of signaling. It establishes credibility.
In conclusion, do all of these things. Keep trucking along. And remember to cut the bullshit. Investors will appreciate it.