LaunchScore accuracy survey results

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At LaunchScore, we are always looking for ways to validate the scores that we produce for small business opportunities across the U.S.

Potential Yearly Earnings (PYE) is a business opportunity’s rated score and is designed to help entrepreneurs more quickly assess the potential of an opportunity in a specific city.

PYE is a monetary estimation of the expected yearly earnings (net profit) after three years. LaunchScore creates an earnings forecast for each business opportunity in every US city with a population over 50,000. The PYE score is based on this earnings forecast.

forecastYear three is set as the PYE based on the assumption that it takes this long for any new business to establish itself in a given market and pay off its startup costs.

To help us gauge the accuracy of LaunchScore’s estimates, we recently surveyed 68 current business owners and asked them to compare the PYE to their own businesses’ net profit by searching for their business type and city on LaunchScore.com. 72% of these business owners found the PYE number to be accurate.

Most of the remaining respondents reported that the PYE was somewhat lower than their current profits. This suggests that the PYE is a lower bound on profitability, and that with good strategy and execution, entrepreneurs can better it!

We hope entrepreneurs will use the PYE to gauge if an opportunity meets their aspirations, and to help them determine their entry and expansion choices.

For more info, check out: How It Works

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André is a Professor of Entrepreneurship at Michigan Tech. At LaunchScore, he is responsible for driving the mission, vision, and goals of the company. He is interested in how firms and entrepreneurs create value through innovation. He has published articles on innovation and entrepreneurship in leading management journals including: Journal of Management, Long Range Planning, Journal of Business Research, and Journal of Engineering Management.