Determine trends by talking to trade suppliers about
what is selling well and what is not. Check out recent
copies of your industry's trade magazines. Search the
Business Periodicals Index (found in larger libraries)
for articles related to your type of business.
Step 2: Establish the approximate size
and location of your planned trading area. Use available
statistics to determine the general characteristics
of this area. Use local sources to determine unique
characteristics about your trading area. How far will
your average customer travel to buy from your shop?
Where do you intend to distribute or promote your product?
This is your trading area. Estimating the number of
individuals or households can be done with little difficulty
using statistics census data. Statistics family expenditure
survey can identify what the average household spends
on goods and services. Information on planned construction
is available from a variety of sources. Directories
the Yellow Pages can help identify names of companies
located in your trading area. Neighborhood business
owners, the local Chamber of Commerce, the Government
Agent and the community newspaper are some sources that
can give you insight into unique characteristics of
Step 3: List and profile competitors
selling in your trading area. Get out on the street
and study your competitors. Visit their stores or the
locations where their product is offered. Analyze the
location, customer volumes, traffic patterns, hours
of operation, busy periods, prices, quality of their
goods and services, product lines carried, promotional
techniques, positioning, product catalogues and other
handouts. If feasible, talk to customers and sales staff.
Step 4: Use your research to estimate
your sales on a monthly basis for your first year. The
basis for your sales forecast can be the average monthly
sales of a similar-sized competitor's operations who
is operating in a similar market It is recommended that
you make adjustments for this year's predicted
trend for the industry. Be sure to reduce your figures
by a start-up year factor of about 50% a month for the
start-up months. Consider how well your competition
satisfies the needs of potential customers in your trading
area. Determine how you fit in to this picture and what
niche you plan to fill. Will you offer a better location,
convenience, a better price, later hours, better quality,
better service? Consider population and economic growth
in your trading area. Using your research, make an educated
guess at your market share. If possible, express this
as the number of customers you can hope to attract.
You may want to keep it conservative and reduce your
figure by approximately 15%. Prepare sales estimates
month by month. Be sure to assess how seasonal your
business is and consider your start up months.
Sales Forecasting for an Existing Business
Sales revenues from the same month in the previous year
make a good base for predicting sales for that month
in the succeeding year. For example, if the trend forecasters
in the economy and the industry predict a general growth
of 4% for the next year, it will be entirely acceptable
for you to show each month's projected sales at
4% higher than your actual sales the previous year.
Credible forecasts can come from those who have the
actual customer contact. Get the salespersons most closely
associated with a particular product line, service,
market or territory to give their best estimates. Experience
has proven the grass roots forecasts can be surprisingly
Sales Forecasting and the Business Plan
Summarize the data after it has been reviewed and revised.
The summary will form a part of your business plan.
The sales forecast for the first year should be monthly,
while the forecast for the next two years could be expressed
as a quarterly figure. Get a second opinion. Have the
forecast checked by someone else familiar with your
line of business. Show them the factors you have considered
and explain why you think the figures are realistic.
Your skills at forecasting will improve with experience
particularly if you treat it as a "live" forecast.
Review your forecast monthly, insert your actuals, and
revise the forecast if you see any significant discrepancy
that cannot be explained in terms of a one-time only
situation. In this manner, your forecasting technique
will rapidly improve and your forecast will become increasingly