new business sales forecasting...

[dave290284]

I am in the process of preparing a business plan in order to getting some funding from the bank to start my business.

I really can't get my head round how I am going to project the sales for the first year, I have spoke to similar companies in london/manchester and various other places but what they sell on a day to day basis is obviously going to be different from what I will (they have been established from many years etc), I fell as though I'd just be taking a stab at it with the figures I am thinking.

My knowledge of my product is excellent however I'm struggling to know how much I'll sell.

Any advice appreciated.

Dave

[DuaneJackson]

I fell as though I'd just be taking a stab at it with the figures I am thinking.


that's all a projection can ever be, so don't worry too much about it.

Do the best you can with the info you have. The most important thing is to know what you need to aim for to break even and to aim for that and track your progress

Good luck

[Philip Hoyle]

The idea of business planning is more about the thought process and relationships between sales, costs of sales, fixed & variable overheads, etc. You must have an idea of your sales - if you havn't then you've not done enough research - the bank want a business plan so that you can demonstrate you've thought things through. You don't say what your business is, so it's hard to give any pointers. I've done quite a few restaurants which may be completely irrelevant at first sight, but may give an idea of the thought process behind the projects - the way I've approached forecasts is as follows:

How many "covers" broken down into number of tables and seats per table.
How many times per day will each table be turned over.
What is the average likely spend per person - establish a "pattern" of average customers, how many courses, drinks tab, etc etc.
Build the spreadsheet so that you can easily change these variables.

Then, apply direct costs to the sales, i.e. %age cost of raw materials for food, average gross profit on meal types, etc.

Then, using the number of diners, establish a relationship with staff wages - some will be fixed, i.e. chef, waitress, manager, and some will be variable according to number of diners, i.e. other kitchen assistants, extra waiting staff, etc etc.

Then look at fixed overheads (not linked to number of customers), i.e. rent, rates, power, advertising, professional fees, finance costs, equipment, etc etc.

You say that from very basic beginnings, you can build up a financial model. Change the number of covers, or the turnover, or average spend, and you see the end result. This is "flexing" the budget.

You can then work backwards from a break-even position to arrive at the number of diners you need per week/day.

The same philosophy applies to any business. If you really haven't the foggiest idea about sales quantities, fair enough, but you still know your fixed overheads, you can work out relationships for variable overheads, presumably you know your "purchases", i.e. what you're selling, the quantities you have to buy/make in a batch, timescales, etc. You can then work backwards having identified your costs to arrive at a break even figure, then consider how reasonable that sales quantity is to achieve and plan your marketing/salesforce etc to ensure that you're going to be able to make that sales quantity.

You really have to make the budget/plan part of your management process - that's what the bank want to see - no-one expects your sales projection to match the actual sales, but what people want to see is that the relationships etc are reasonable.

[Billmccallum]

My practice for cashflow forecasting has always been to work backwards... what will the running costs be? How many sales will I need to cover the costs?

e.g.

Cost of Sales

Fixed Costs (a)
Variable costs (b)

= Total

Sales

Product 1 (n x £299)
Product 2 (n x £399)
Product 3 (n x £499)

= Total

If you can use a spreadsheet, its quite simple to set one up to do the calculations for you, then all you have to do is play with the numbers a little until you have the best scenario for your plan.