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Sales Forecasting For New Business

by: Ben Botes

Sales forecasting is the process of organizing and analysing information in a way that makes it possible to estimate what your sales will be. This Micro Module outlines some simple methods of forecasting sales using easy to find data. Books containing simple and sophisticated techniques of forecasting sales can be found in libraries and business oriented book stores.

If you sell more than one type of product or service, prepare a separate sales forecast for each service or product group.

There are many sources of information to assist with your sales forecast. Some key sources are: Competitors; Neighbouring Businesses; Trade suppliers; Downtown business associations Trade associations; Trade publications; Trade directories;

Factors that can affect Sales can be divided into external and internal influences. Examples of these are:

External:
Seasons; Holidays; Special Events; Competition, direct or indirect Competition, External labour events; Productivity changes Family formations; Births and deaths; Fashions or styles; Population changes; Consumer earnings; Political events Weather

Internal:
Product changes, style, quality; Service changes, type, quality; Shortages, production capability; Promotional effort changes Sales Motivation plans; Price changes; Shortages, inventory; Shortages/working capital; Distribution methods used Credit policy changes; Labour Problems

Creating a sales forecast can be divided into four steps.

Step 1
Develop a customer profile and determine the trends in your industry.

Make some basic assumptions about the customers in your target market. Experienced business people will tell you that a good rule of thumb is that 20f your customers account for 80f your sales. If you can identify this 20ou can begin to develop a profile of your principal markets.

Sample customer profiles:
male, ages 20-34, professional, middle income, fitness conscious.

Young families, parents 25 to 39, middle income, home owners.

Small to medium sized magazine and book publishers with sales from $500,000 to $2,000,000

Determine trends by talking to trade suppliers about what is selling well and what is not. Check out recent copies of your industry's trade magazines. Search the Business Periodicals Index (found in larger libraries) for articles related to your type of business.

Question: What are five customer profiles for your business?

Question: What are some customer trends for your customers/clients?

Step 2
Look at the area where you will be trading

Establish the approximate size and location of your planned trading area.

Use available statistics to determine the general characteristics of this area.

Use local sources to determine unique characteristics about your trading area.

How far will your average customer travel to buy from your shop? Where do you intend to distribute or promote your product? This is your trading area.

Estimating the number of individuals or households can be done with little difficulty using national census data to be found at your library or town hall. Your local statistics office or chamber of commerce can identify what the average household spends on goods and services.

Neighbourhood business owners, the local Chamber of Commerce, the Government Agent and the community newspaper are some sources that can give you insight into unique characteristics of your area.

Question: What are the statistics on the people in your area?

Step 3
List and profile competitors selling in your trading area.

Refer back to the data you collected in your market research.

Get out on the street and study your competitors. Visit their stores or the locations where their product is offered. Analyse the location, customer volumes, traffic patterns, hours of operation, busy periods, prices, quality of their goods and services, product lines carried, promotional techniques, positioning, product catalogues and other handouts. If feasible, talk to customers and sales staff.

Step 4
Use your research to estimate your sales on a monthly basis for your first year.

The basis for your sales forecast could be the average monthly sales of a similar-sized competitor's operations that are operating in a similar market. It is recommended that you make adjustments for this year�s predicted trend for the industry.

Be sure to reduce your figures by a start-up year factor of about 50
month for the start-up months.

Consider how well your competition satisfies the needs of potential customers in your trading area. Determine how you fit in to this picture and what niche you plan to fill. Will you offer a better location, convenience, a better price, later hours, better quality, and better service?

Consider population and economic growth in your trading area.
Using your research, make an educated guess at your market share. If possible, express this as the number of customers you can hope to attract. You may want to keep it conservative and reduce your figure by approximately 15�

Prepare sales estimates month by month. Be sure to assess how seasonal your business is and consider your start up months.

Further tips
Sales revenues from the same month in the previous year make a good base for predicting sales for that month in the succeeding year. For example, if the trend forecasters in the economy and the industry predict a general growth of 4or the next year, it will be entirely acceptable for you to show each month�s projected sales at 4igher than your actual sales the previous year.

Credible forecasts can come from those who have the actual customer contact. Get the salespersons most closely associated with a particular product line, service, market or territory to give their best estimates. Experience has proven the grass roots forecasts can be surprisingly accurate. Sales Forecasting and the Business Plan

Summarize the data after it has been reviewed and revised. The summary will form a part of your business plan. The sales forecast for the first year should be monthly, while the forecast for the next two years could be expressed as a quarterly figure. Get a second opinion. Have the forecast checked by someone else familiar with your line of business. Show them the factors you have considered and explain why you think the figures are realistic. Your skills at forecasting will improve with experience particularly if you treat it as a "live" forecast. Review your forecast monthly, insert your actual, and revise the forecast if you see any significant discrepancy that cannot be explained in terms of a one-time only situation. In this manner, your forecasting technique will rapidly improve and your forecast will become increasingly accurate.

About the author:
Ben Botes is an author, entrepreneur and expert speaker on new venture creation. He is also the founder of a web portal for 1st time business owners and entrepreneurs. Visit my1stbusiness.com today for the most extensive range of small business resources, courses, articles and tools. Contact; ben.botes@my1stbusiness.com

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Forex: Benefits of Trading the Forex Market
by: Raul Lopez

Trading the Forex market has become very popular in the last years. Why is it that traders around the world see the Forex market as an investment opportunity? We will try to answer this question in this article. Also we will discuss come differences between the Forex market, the stocks market and the futures market.

Some of the benefits of trading the Forex market are:

Superior liquidity.

Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid financial market in the world with nearly 2 trillion dollars traded everyday. This ensures price stability and better trade execution. Allowing traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended manner.

24hr Market.

This one is also one of the greatest advantages of trading Forex. It is an around the click market, the market opens on Sunday at 3:00 pm EST when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminates operations. There are transactions in practically every time zone, allowing active traders to choose at what time to trade.

Leverage trading.

Trading the Forex Market offers a greater buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing traders to have only 0.25% in margin of the total investment. For instance, a trader using 100:1 means that to have a US$100,000 position, only US$1,000 are needed on margin to be able to open that position.

Low Transaction costs.

Almost all brokers offer commission free trading. The only cost traders incur in any transaction is the spread (difference between the buy and sell price of each currency pair). This spread could be as low as 1 pip (the minimum increment in any currency pair) in some pairs.

Low minimum investment.

The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $300 USD, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.

Specialized trading.

The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (85% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.

Trading from anywhere.

If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.

Some of the most important differences between the Forex market and other markets are explained below.

Forex market vs. Equity markets

Liquidity

FX market: Near two trillion dollars of daily volume.

Equity market: Around 200 billion on a daily basis.

Trading hours

FX market: 24hr market, 5.5 days a week.

Equity market: Monday through Friday from 8:30 EST to 5:00 EST.

Profit potential

FX market: In both, rising and falling markets.

Equity market: Most traders/investor profit only from rising markets.

Transaction costs

FX market: Commission free and tight spreads.

Equity market: High Commissions and transaction fees.

Buying power

FX market: Leverage up to 400:1.

Equity market: Leverage from 2:1 to 4:1.

Specialization

FX market: most volume (85%) is made on major currencies (USD, EUR, JPY, GBP, CHF, CAD and AUD.)

Equity market: More than 40,000 stocks to choose from.

Forex market vs. Futures market

Liquidity

FX Market: Near two trillion dollars of daily volume.

Futures market: Around 400 billion dollars on a daily basis.

Transaction costs

FX market: Commission free and tight spreads.

Futures market: High commissions fees.

Margin

FX market: Fixed rate of margin on every position.

Futures market: Different levels of margin on overnight positions than day time positions.

Trade execution

FX market: Instantaneous execution.

Futures market: Inconsistent execution.

All this makes the Forex market very attractive to investors and traders. But I need to make something clear, although the benefits of trading the Forex market are notorious; it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, as any other market.

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