Hi all - I'd appreciate input form other small business owners concerning how
you have responded to these questions in the past.
We're a small software firm - have been in operation for about two years -
obviously private. We've put most of our start-up resources into software
development and have released a product with excellent potential. We've got a
few big clients already. We have great visibility in our market, but now some
new prospects are asking for our annual revenue numbers. Our competition
includes large, public companies and revenue-wise there's no way we can
compete.
What should we say when asked for our revenue numbers? Is it acceptable to
say "Because we're a private firm and relatively new, we have decided to not
yet divulge our annual revenue. However, here are some references from folks
at a few high-profile companies who are currently using our product!"
Or is that a total cop out and I should just cough 'em up?
Secondly, if you think I should give numbers, can I give projections for this
year or is it expected that I give actual revenue for last?
Finally, are there legal reasons for a private firm to not divulge revenue
details?
Thanks in advance!
Heather
There are valid business reasons why your customer wants to have an idea of
your financial performance and condition. In fact some regulated industries
are required to review all vendors, and have to have a formal system in
place. One of the things that my Department does is to perform credit vendor
due diligence for the bank that I work for. We not only ask for revenue
figures, we ask for three years of financial statements. If the vendor
refuses to provide them, we do not approve them but the procurement
department can override our decision if they want to.
There is nothing that prohibits a private firm from sharing their financial
information other than the firm's desire to keep information close to the
vest. It comes down to a business decision. Giving them small revenue numbers
could give the prospective customers concern, but keeping the numbers secret
could also give them concerns.
It would be foolish for anybody to think that a small company would be able
to compete with a large public company in revenues, but the prospective
customers might want to know if you have any revenues at all or if they are
going to be guinea pigs for a new product.
I think you should ask them what their concerns are. Are they concerned that
you are a small software company and might not be around in a year time? You
should try to address their concerns but without divulging revenues. For
examples:
- mention big customers using your software
- let them talk to an existing customer to get referrals and feedback
- offer conditions to reduce their purchase risk, if that's their concern:
money back, pay monthly, quit without penalties, contracts that specify what
happens with the data and services if you go bankrupt
BizResearcher | Window Shopper |
5/2/2012 - 11:54 am
Have the new prospects told you why they need or want your revenue numbers? I
can see a company that is considering placing large, on-going orders wanting
the assurance that you will be around for years to come, but, like you, I
would be reluctant to provide numbers without knowing exactly why they are
being sought. I would simply say "we are a private company and that
information is not publicly available, but be assured we are profitable and
rapidly growing (assuming that is true)." If they press the issue, then offer
the references. You may want to ask your accountant for her/his opinion. If
you decide to provide numbers, you may want to refer the prospects to your
accountant and let her/him respond.
loanuniverse | Window Shopper | 5/4/2012 - 11:27 pm
your financial performance and condition. In fact some regulated industries
are required to review all vendors, and have to have a formal system in
place. One of the things that my Department does is to perform credit vendor
due diligence for the bank that I work for. We not only ask for revenue
figures, we ask for three years of financial statements. If the vendor
refuses to provide them, we do not approve them but the procurement
department can override our decision if they want to.
There is nothing that prohibits a private firm from sharing their financial
information other than the firm's desire to keep information close to the
vest. It comes down to a business decision. Giving them small revenue numbers
could give the prospective customers concern, but keeping the numbers secret
could also give them concerns.
It would be foolish for anybody to think that a small company would be able
to compete with a large public company in revenues, but the prospective
customers might want to know if you have any revenues at all or if they are
going to be guinea pigs for a new product.
clevertim | Window Shopper | 5/2/2012 - 4:14 pm
you are a small software company and might not be around in a year time? You
should try to address their concerns but without divulging revenues. For
examples:
- mention big customers using your software
- let them talk to an existing customer to get referrals and feedback
- offer conditions to reduce their purchase risk, if that's their concern:
money back, pay monthly, quit without penalties, contracts that specify what
happens with the data and services if you go bankrupt
The key is to address their concerns.
BizResearcher | Window Shopper | 5/2/2012 - 11:54 am
can see a company that is considering placing large, on-going orders wanting
the assurance that you will be around for years to come, but, like you, I
would be reluctant to provide numbers without knowing exactly why they are
being sought. I would simply say "we are a private company and that
information is not publicly available, but be assured we are profitable and
rapidly growing (assuming that is true)." If they press the issue, then offer
the references. You may want to ask your accountant for her/his opinion. If
you decide to provide numbers, you may want to refer the prospects to your
accountant and let her/him respond.
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