How to Make Accurate Sales Projections in a New Business

Beng able to accurately forest sales s mportant for determnng wh your busness wll be proftable and f t wll need startup fundng. But projectng sales wthout any hstorl ta to go on s dffcult. Here’s what you need to do to fgure t out.

How to forest sales probably sn’t top of mnd wh you decde to start a busness. But t should be. You may want to start a busness dong somethng you , or to help other people, or beuse you want to be your own boss. But you want to make money too. So, one of the most mportant thngs you need to do s create a sales projecton. After 90 ys, sx months, and one year, what wll your sales look lke and how wll that translate to proft?

Ths sn’t a queston to ask beuse you’re only about the proft. The answer has some bg mpltons. Your sales forest dctates how much money you need before you start the busness.

f you need fundng of any sort, any pottal lder, ncludng famly and frds wll want to know the upsde pottal of ther nvestmt. You n use sales projectons to decde a launch te. Knowng how much you wll make n the short term helps you fgure out how much money you need to save pror to your launch.

t wll help wth nvtory. f you have a reasonably accurate projecton, you know how much product or raw materals to order. Fnally, marketng. f your 90 y projecton looks a lttle lght, you mght have to ramp up your marketng budget.

No busness n make spoton forests but they n get close. Don’t am for perfecton. Your job s to make the most eduted guess possble.

Before dggng nto your numbers, dg nto your ndustry. These ta wll help to project based on others who me before you. Lookng at the past doesn’t necessarly have any correlaton to the future but t’s a fne place to start.

Most trade groups n supply you wth massve amounts of ta but you’ll probably have to pay for t. f you’re n the restaurant busness, go to the Natonal Restaurant Federaton, for example.

Before you get too far nto nng your startup, quckly dtfy your trade group. Some of the ta wll come at a cost but they wll also have plty of resources that n help you op your doors. Part of ther msson s to strgth ther sector of economy. To that d, they wll gve you all the help you need to op your doors.

Small Business Development Centers (SBDCs) and SCORE offces have counselors avalable free of charge. The people at these two organzatons have ndepth experce and knowledge of small busnesses and may be able to help you more quckly gather the statstl and anecdotal nformaton you need to make accurate sales forests for your busness. These two groups are nvaluable resources for small busnesses (exstng as well as startups). Get to know them and beft from ther help. Both organzatons have lotons n every state n the US. 

f you’re lookng for statstl ta, the fastest way to get drected to the rght resources to use – and sometmes to get free access to tabases you mght otherwse have to pay for –s to talk to the referce lbraran at your lol lbrary. Referce lbrarans are traned to know what resources to use and n save you hours of tme by pontng you to the specfc source of the ta you need.  The lbrary may also have subscrptons to feebased tabases and make access to those tabases avalable to ther patrons. 

You n get ta from a trade group but talkng to somebody n the ndustry you’re terng s ev better. They may not want to gve you detaled fnancals but they’ll probably be happy to gve you geral fgures and currt ndustry trds. You mght have to go outsde of your geographl area to fnd a noncompettor but the nformaton s sure to be valuable.

f you’re buyng product from a vdor, talk to them about sales. t’s n ther best nterest to set you up for success. Expect them to have a lot of ndustry nformaton that n help you make projectons.

But be reful. Beuse vdors are motvated to sell, they may tell you what you want to hear. f thngs seem a lttle too good to be true, they probably are.

Now t’s tme to dg n to the numbers. Expses are much easer to forest than ncome. f you’re gettng close to opng you probably know your rt, utltes, and other fxed costs.

Costs lke advertsng, legal and lcsng fees, and costs of goods sold are harder to forest but not as hard as sales.

For marketng, double your estmates and for legal, nsurance, and lcsng, trple your number. These expses are always hgher than you orgnally thought.

You have dreams and there s harsh realty. Nether s lkely accurate but make projectons for both. Your conservatve projectons mght assume lttle marketng, low prce ponts, lttle or no sales staff, and hgher expses. Your aggressve projectons mght assume multple prce ponts, a fullon marketng strategy (wth money to pay for t) and a team of salespeople.

The truth les somewhere n the mddle.

Sales are mportant but proft s what keeps your doors op. f you have no sales, obvously, gettng the sh flow gong s esstal but not far nto your growth cycle, start makng forests for gross margn growth nstead of purely sales growth.

Seeng s walk through the doors feels lke success but t’s only success f your margns allow for the growth of your busness.

Also ress your operatng proft margn—the rato of all operatng costs to total revue. As revue grows total overhead should become a smaller perctage of total costs.

RELATED: How to Estimate Sales

Your future sales are based on marketng, loton, your competton, prcng structure, your busness knowledge, weather, economc clmate, and much more. Do your research but be on the conservatve sde. t’s better to am low and farexceed the projecton than to overpromse and under delver. After all, Wall Street has followed that formula for more than a ctury.

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