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How to Forecast Your Sales

Sales forecasting is the process of organizing and analyzing information in a way that makes it possible to estimate what your sales will be. This guide outlines some simple methods of forecasting sales using easy to find data. Books containing simple and sophisticated techniques of forecasting sales can be found in libraries and business oriented book stores

If you sell more than one type of product or service, prepare a separate sales forecast for each service or product group.

There are many sources of information to assist with your sales forecast. Some key sources are:

Competitors

Neighboring Businesses

Trade suppliers

Downtown business associations

Trade associations

Trade publications

Trade directories

Factors that can affect Sales

External:

Sales Forecasting for a New Business

These steps for developing a sales forecast can be applied to most kinds of businesses:

Step 1: Develop a customer profile and determine the trends in your industry.

Make some basic assumptions about the customers in your target market. Experienced business people will tell you that a good rule of thumb is that 20% of your customers account for 80% of your sales. If you can identify this 20% you can begin to develop a profile of your principal markets.

Sample customer profiles:

male, ages 20-34, professional, middle income, fitness conscious.
Young families, parents 25 to 39, middle income, home owners
Small to medium sized magazine and book publishers with sales from $500,000 to $2,000,000

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 cheap one month auto insurance quotes online low cost. 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 your area.

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 accurate.

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 accurate.

Food For Thought
One of the biggest reasons that things never get done is the desire for perfection. We feel that we have to do something perfectly the very first time. If we don't think that's possible (and it rarely is) then we avoid doing it altogether.
In reality, the only way to even approach perfection is through practice and experience. Highly successful musicians, professional golfers, public speakers, surgeons and others who have mastered a particular discipline, know the value of experience. And experience consists largely of past mistakes. Mistakes are excellent teachers. They're nothing to be afraid of.

Of course anything worth doing is worth doing right. There's nothing wrong with having mastery as your goal. But if you're ever going to get anything done, you must start somewhere. If it's not perfect, so what? Give it your best shot and learn from the experience. If you could do everything perfect the first time, how would you ever learn anything? Learn and live by doing, not by wishing for perfection.

You owe it to life to do what you love. Whatever you enjoy doing, that is a gift you've been given. It is your own unique contribution to the world. It will take you anywhere you want to go if you will take the time and effort to develop it.
When you develop your own unique talents, you gain confidence, and a larger vision of yourself. That will have a positive influence on every part of your life.

Decide to master something that you love. Put forth a sustained, consistent effort. Do something every day to develop your skills and knowledge in that area.

It's almost impossible to be successful at something that you dislike. Success requires inspiration and dedication, commitment and hard work. Can you be totally committed to something you hate to do? Probably not.

Whatever you enjoy doing, there's a reason for it. Your enjoyment is life's way of motivating you to excel in an area where you have a skill and a desire to make a difference. Put that motivation to work for you.
There's someone in your life who can be very valuable to you. Someone who can offer you excellent advice. Someone who understands you. Someone with whom you can easily communicate. That person is YOU.
Unfortunately, most of us don't devote very much time to being with ourselves. We're too busy with the pressing day-to-day concerns of life. We're too busy worried about what other people want, or think, or do.

Many people never realize their greatness because they get sidetracked by life. They forget about their dreams. Don't let this happen to you. Get in the habit of spending quality time with yourself on a daily basis. Remind yourself of your purpose in life, of your dreams and ambitions.

Listen to your own thoughts. Explore your feelings. Indulge your ideas and your fantasies.

You are your greatest asset. There's a wonderful, unique person inside of you. Someone who has many things to offer the world. Get to know yourself. Become the person you were meant to be.