Project Sales

Whether you’re setting up a business plan to present to a bank or investors or you’re just punching a line item on your To Do list, sales projections can be a valuable management tool if done right. When you project sales and follow through by comparing actual figures to the forecast, you more accurately gauge what’s going on in your business and more quickly make course corrections as needed. Follow the steps in this article to accurately project sales for your business.

Steps

Break Your Business into Manageable Sales or Expense Units

  1. Start with expenses.
    • Consider fixed and variable expenses, from rents and fixed loans to payroll and utilities, plus capital equipment and inventory, as well as a marketing or advertising budget.
    • Allow for bad debt or returns and a profit margin.
  2. Factor in income sources.
    • Any business, whether product or service, will have units to measure, even if it’s time itself (such as professionals billing by the quarter hour).
  3. Review past sales figures to determine the cycle your business operates in: its ebb and flow.
    • For example, most retail establishments can run in the red during summer vacation and make the bulk of their income during the holidays.
  4. Divide income by expenses to arrive at a baseline sales price.
    • To manage your business going forward, tie this sales price back to the income units, such as by product type or by seasonality, so you can compare future figures to past sales.

Analyze Your Market

  1. Compare the average sales per square foot for your store to stores like yours.
    • Compare stores of similar size, in a similar industry, in a similar locale.
  2. Create a target zone around your business and estimate the total number of consumers using or needing your product or service within each zone (for example, within {{safesubst:#invoke:convert|convert}}, {{safesubst:#invoke:convert|convert}}, 10 miles).
    • Determine market share. Which businesses do consumers patronize for your product or service? What percentage do you get compared to competitors?
  3. Use your unit breakdown and weight the per-unit figure by overall sales.
    • For example: you sell five item categories total. 1 category sells 5 units per day, 2 sell 3 units each, and 2 sell 1 unit each. Multiply the price of each unit by the number sold for a total current revenue figure.

Develop a Marketing Projection

  1. Decide how best to promote your products and services, and estimate the number of customers you anticipate reaching.
  2. List how you plan to grow your business.
    • Options include selling more current products to existing customers, attracting more customers with current products and introducing new products to current or prospective customers.
  3. Review past marketing approaches to see which yielded the best results.
    • How well do these promotions match your current product and customer mix? Can you replicate the promotions? Do different promotions promote sales to different customer groups, or move different product categories?
  4. Match the promotion, product, and customer base to estimate how much you anticipate selling as you move forward.

Do the Math

  1. Calculate projected sales with this simple equation: Multiply total number of customers times the average per-unit price.
  2. Run this equation several times: by product category, by customer type, by the anticipated outcome of promotions.
    • The more meticulous you have been in breaking down your business, the more accurately you can project sales.
  3. Compare your figures against industry norms.
    • Ask a business associate or mentor to look over your figures.
    • Look up forecasts from within the industry, often published in trade magazines.
    • Peruse an annual report of a competitor or a business of similar size in your area.
    • Check out sample plans your banker, Chamber of Commerce, or Small Business Administration office may make available.

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Sources and Citations

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