How to conduct a Sales Forecast for a New Business

Statistics show that 80 percent of new business startups never survive the first three years. Nine out of 10 of those business failures are caused by poor management decisions. Implementing sales forecasting forces a new business to base decisions on facts rather than hunches. Since you have no historical information on your new business, i.e., past sales, you need to look elsewhere.

You need to consider the following:

  1. How well does your competition satisfy the needs of its potential customers?
  2. Note the population and economic growth in your location.
  3. Develop a customer profile.
  4. Experienced business people will tell you that a good rule of thumb is that 20 percent of your customers account for 80 percent of your sales. If you can identify this 20 percent, you can begin to develop a profile of your main markets.

After you've identified your primary markets, then you need to determine trends in your industry. Now you need to know the approximate size and location of your planned trading area. Your trading area is how far your average customer will travel to shop, as well as how far you are prepared to distribute and promote your product or service. It is helpful to recognize the personality of your trading area, which can be found by talking to other neighborhood business owners, contacting the Chamber of Commerce, and reading the local papers.

At this point, you should be able to estimate your sales on a monthly basis for a year. The basis for your sales forecast could be the average monthly sales of a few similar-sized competitors that are operating in a similar market.

To estimate their sales, you have to list, profile and study your competitors. This is accomplished by visiting either their stores or the stores where their products are offered. You need to analyze their customer volumes, the location, hours of operation, traffic patterns, busy periods, quality of their goods and services, prices, product lines carried, promotional techniques, positioning, product catalogues and other handouts. If possible, talk to customers and sales staff.

Learn more about Sales Forecasting

Importance of Sales Forecasting

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