Sales projections can be one of the most difficult tasks facing new business owners. After all, we don’t have a crystal ball to tell us how popular our products will be with customers or how long it will take for them to realize that we even exist. Sales projections for new businesses can be about as accurate as throwing darts blindfolded. At the end of the day, all projections are a guess but there are a few things you can do to at least make it an “educated” guess.
Create a Marketing Plan
Have you identified your target customers yet? No, your target customer isn’t “anyone with money.” Try to define your target customer profile based on demographics, geography, income levels or any other basis that makes sense for your business. It’s alright to have more than one group identified but define which are truly “target” and which are “secondary” for your business.
Once you know who your target customers are, create a plan for reaching these people with your marketing message. What type of media do they prefer? Are there any groups that many of them belong to? How much are you budgeting toward this marketing plan? A well-rounded marketing plan will drive your sales projections.
It’s inevitable that much of your projections will be based on assumptions but make sure that these assumptions are specific. For instance, estimate sales based on number of customers per day and sales per customer instead of a more generic sales per week. Being specific will help you (and your advisors) evaluate the reasonableness of your assumptions.
Depending on your business, you may also want to estimate sales based on type of product and target market as well. Being specific allows you to change assumptions as you re-work your projection so that you can keep the parts that turn out to be accurate while changing those that aren’t.
Do Your Homework
Research how much similar age and size stores sell. Some industries measure an “average” sales by square foot of sales space while others may measure based on other factors. Find out what is typical in your industry but don’t assume you will start out at “average.” For most new businesses, it takes a substantial amount of time to gain the recognition from consumers to reach this point of “average” and may not ever reach that point.
Test your prices and product selections by using focus groups and other methods. These tests will help you ensure that you have the right mix for your target audience. If your target market provides feedback on your products and prices, listen to them!