Even if you are an existing business – you should be forecasting – projecting your sales. You may use actual numbers if you have historical financial records. But what do you do if you have nothing to refer back to? You will need to determine how many potential customers are there, how many of these potential customers are likely to buy from you, decide the average sale per customer and then project this out for the year. Try this:
First, determine the total number of potential customers living in your territory. (Don’t forget – the more clearly you can define your customer – the more realistic your research!) If you sell to the general public, you need to find the information from the new US Census data for your market area. You can find this information on the web or at the library (http://www.census.gov).
If you sell to other businesses, there are many potential sources of information; one of the best is a trade association that represents your industry. You can also find this information through a web search or at the public library. Once you have determined the total number of potential customers living within your geographical area – you have the base to begin narrowing down your target market.
Second: determine the number that will likely buy from you. You need to be realistic. Consider your competition (both in number and quality), consider that some of the people will not buy from you or your competition, and consider people will find substitutes for your product. What percentage of the total available population will you be able to attract?
Third: determine your average customer sales per year. How many purchases will your average customer make in a year? How much will they spend on each purchase? Is this a repeat business or once and only once. Does the average customer buy the same product/service or will they need other complimentary services? Trade associations are good sources of information to help answer these questions.
Fourth: determine your annual sales volume. You have determined the number of customers and determined the average amount each customer will spend per year. Multiply these two numbers together to calculate your expected annual sales volume.
Finally: Evaluate the annual sales volume figure. Does the number you calculated make sense? If not, go back and work the numbers again. What assumptions have you made about your customers? How accurate or risky are these assumptions. You can guess, and this is not a bad place to start. But – then – you need to back up your assumptions with actual figures to gain the greatest degree of reality for your projections.