Thursday, November 12, 2009

Forecasting in business:

Sales forecasting is especially difficult when you don’t have any previous sales history to guide you, as is the case when you’re working on preparing cash flow projections as part of writing a business plan. Here, is some detailed explanation of how to do sales forecasting.
There are many ways to estimate sales revenues for the purposes of sales forecasting.
For example..
when there is sales forecasting ,you plan to work with a bank for financing, you will want to do multiple estimates so as to have more confidence in the sales forecast. How do you do this?

Sales Forecasting Method #1
For your type of business, what is the average sales volume per square foot for similar stores in similar locations and similar size? This isn't the final answer for adequate sales forecasting, since a new business won't hit that target for perhaps a year. But this approach is far more scientific than a general 2 percent figure based on household incomes.

Sales Forecasting Method #2
For your specific location, how many households needing your goods live within say, one mile? How much will they spend on these items annually, and what percentage of their spending will you get, compared to competitors? Do the same for within five miles (with lower sales forecast figures).

Sales Forecasting Method #3
If you offer say, three types of goods plus two types of extra cost services, estimate sales revenues for each of the five product/service lines. Make an estimate of where you think you'll be in six months (such as "we should be selling five of these items a day, plus three of these, plus two of these.") and calculate the gross sales per day. Then multiply by 30 for the month.
Now scale proportionately from month one to month six; that is, build up from no sales (or few sales) to your six month sales level. Now carry it out from months six through 12 for a complete annual sales forecast.
Also Remember..
Don’t Just Do One Sales Forecast
Include Expenses in Your Sales Forecasting

posted by Abdur Rehaman