How to Estimate Sales
by Janet Attard
Accurate estimating sales as a new business is difficult. You have no history to review and it's easy to overlook expenses when you've not been in business long. Here's where you can look for reliable data to build your initial estimates upon.
One task most startups struggle with is accurately predicting sales. With no sales history to go on, entrepreneurs planning their new business often make estimates based on statistics that don't take into consideration all the factors that will actually come in to play once they open their doors. As a result, they often overestimate their future sales volume and underestimate the amount of money they'll need to start the business and keep it going until it becomes profitable.
One typical approach is to predict sales by researching the size of the market for the product or service and then estimate what sales will be assuming the business gets some small percentage of that market.
The problem with this approach is that the market share assumptions are often pulled out of thin air. They sound good on paper – "Hey, we only need to get 1% of the market and we'll make a fortune." -- but without any sales history to back them up, they're often way off base.
You can avoid the problem by researching sales results that have been achieved by other companies the size of yours.
One source for this information is industry trade magazines. Look to see if they have published or sell reports about the industry, information about changes in same-store sales, and other data that will be useful to you. (While you're at it, look for articles and editorial pieces about changing trends in the industry that might affect sales in the future.)
Go online and search for phrases like "average annual sales auto repair shop."
Review US Census data for your industry.
Visit your local library and the nearest Small Business Development Center and ask if they can help you locate financial information to help you make realistic sales projections.
Consider purchasing industry financial data.
Contact other business owners in your industry and ask about their experience. Business owners who are not in your geographic area may be willing to share tips and information about the average number of sales, busy and slow seasons, and other data that may help you more accurately predict sales.
Contact industry vendors and ask for information to help you predict sales.
If possible, attend an industry trade show. Question vendors and other knowledgeable people about what the typical annual sales are, how long it takes to get established, and other information that may help you predict your sales.
Doing this type of research will help you make more realistic sales projections and get a better understanding of what it takes to be successful in your industry.
Copyright © 2009 Attard Communications, Inc.
May not be copied, reprinted, or reproduced without express permission from Attard Communications, Inc.
About the author:
Janet Attard is the founder of the award-winning Business Know-How small business web site and information resource. Janet is also the author of The Home Office And Small Business Answer Book and of Business Know-How: An Operational Guide For Home-Based and Micro-Sized Businesses with Limited Budgets. Follow Janet on Twitter at http://www.twitter.com/JanetAttard.