Forecasting Sales in Your Business Plan for Your New Business

Writing a business plan is one of the most important things you can do before starting a business and the hardest part is usually forecasting sales. After all, how are you supposed to know what they are going to be? But then again how can you write a business plan without some sort of sales estimate so how do you do it?

Don't make the fatal "just one percent" mistake

Many up and coming entrepreneurs take a look at the market and think to themselves, "All I really need is one percent of the market, after all it is a X million dollar market and one percent of that is Y dollars." It seems reasonable doesn't it? Wrong! If you use this method to forecast your sales for your business plan, you are surely on the way to bankruptcy. Why? Because you haven't answered the single most important question which is how are you actually going to make sales. Nothing says that just because you open your doors customers will beat their way to your door.

Focus on how you are going to get your first sale

Visualize your first sale, not your first month, not your first week, but your very first single sale. How is it actually going to happen? How are you going to find the customer, or are they going to find you? What is it really going to take to make a single sale? How many hours of your time? How many hours of employee time? What other costs will you incur?

Once you get the answer to that question ask yourself what it takes to get the second sale, the third sale, and so on. Will each additional sale take the same number of hours? Maybe you will build efficiency over time but maybe you won't.

Make sure your sales forecasts are in line with your resources. For example, if you think that it will take you twenty hours to make a sale make sure you plan on hiring an employee once you start forecasting more than two sales a week.

Don't count on some magical growth percentage

You'll find many business plans with a well thought out sales forecast for the first month but then each following month has a fixed percentage of growth. No business has ever grown like this, ever. Some months are going to be down, some are going to be up but never just a consistent growth percentage. You need to carefully consider the sales for each and every month and decide what they will be based on as many known factors as possible.

Consider Seasonality

One important consideration for your sales forecasts is seasonality. Almost all industries have their busy and slow seasons. Make sure you know how to forecast the sales seasons for your business. For example tourism is usually busy in the summer but a toy store does a vast majority of their business during the Christmas season. If you don't know the seasonality effects for your industry do the research.

Don't ever let your expenses influence your sales forecast, not even a little bit

Almost everybody has been tempted to do this. You go through all the effort to estimate your revenue and expenses only to see your bottom line it just isn't enough, maybe it is even a loss. Don't be tempted to just add a little on the sales line. If anything your actual sales are more likely to be less than forecasted. The best thing to do is focus on ways to decrease your expenses.