Predicting likely sales for your Pet Shop business is a very chief process; you should have a strong idea before you commence your business of your likely sales. It is doubtful you will be right on the money but if you do not make a realistic effort your Pet Shop business will likely go out of business; forecasting is an important component to your business stratgey.
Your sales forecast is the economic projection of the quantity of revenue your Pet Shop business will take home from the sales of its products or services. Your sales forecast can stand alone, but it will be closely connected to your Pet Shop business plan. It is an integral and fundamental section of the planning method and it will be a chief part of your profit and loss account and cash flow forecast.
So why do you need to forecast sales?
A sales forecast is necessary in order to
1. Predict your cash flow – your forecast might predict slow times of business where you may need a cash injection to pay for products or merely to pay the staff for example
2. Manage Cash flow – key to the success of your business, it is important that you be aware of how sales forecasting contributes to the calculation of the cash flow forecast.
3. Plan future resource requirements – for example, the amount of personnel considered necessary to deal with your orders and provide a certain level of service.
4. Plan marketing activities – this will obviously have a knock on effect to the quantity of sales you make as well.
Whatever the situation, it is critical that you study your expected sales frequently and realistically, and take proper action to re-examine your strategy. Your sales forecast is the yardstick alongside which you ought to repeatedly assess what really happens in your business in terms of sales and the important thing is to appreciate the variances and why they come about, and to incorporate what you have learned into coming forecasts.
What fundamentals do you need to think about?
Your sales forecast should show sales by month for at least the next 12 months, and then by year for the following two years. Three years, in total, is generally enough for most business plans.
Things to think about
1. Are there any related products or services already being provided in the neighborhood?
2. What is the size of the market?
3. Is this an escalating/contracting market and if so; by what %?
4. What are the main considerations for this market?
5. Have you seen any factors that may influence it in the future?
6. How do recurring factors influence purchases of your product or service?
7. What trends or fashions are pertinent to the sector?
Do you know who your customers are?
1. How many customers will in reality buy your product or service?
2. Why will they bring to a close buying from someone else to trade from you?
3. What is your pricing rule and how will it impinge on sales?
4. Do you have the means to offer the amount of products and services?
5. How many other businesses like yours are out there?
6. It’s unlikely your business is the only one of its kind – what happens to your customers when additional businesses enter the market?
The entire the human race is your marketplace with the invention of the world wide web – but what products/services can you supply? How can you differentiate your business from your competitors’ businesses? Just how accommodating with regard to pricing and the scope of products or services offered can you be?
Preparing your Pet Shop business forecast
All Pet Shop businesses need to base their forecasts on certain assumptions regarding potential changes that may take place in the future. These can be quantified and could include:
1. Sector increase/decline by a certain percentage e.g. 5%.
2. Personnel increase to increase production or sales – maybe 25%.
3. A move to a different location that ought to produce a 40% increase in sales.
Preparing your forecast
If you sell more than one product or service, you should prepare a separate forecast for each product in your range,and forecast:
1. By volume
2. By value
3. By a combination of both volume and value.
So what are the pitfalls when forecasting sales?
1. Make sure your forecast is based on realistic, supportable and unbiased info.
2. Do not be tempted to take no notice of your research if it showed negative results.
3. Don’t make projections exclusively on historical results. Put your business under a microscope – try and imagine what might have an effect on your sales in the future – good or bad.
4. What is the upper limit of products you can produce in a day?. Is it physically possible to produce the amount of sales being forecast with the equipment,personnel and financial resources available to you?
5. Are your prices realistic?, or conversely, have the prices been set too low down or too high so that either way your forecast is potentially unrealistic?
6. Is your business brand new?, have you considered that it possibly will take longer for your business to become established, and have you set accordingly realistic sales goals?
7. Once early sales have dropped off after your business launch, have you allowed for the increased marketing costs your business might incur?
8. When you explain your sales forecasts to prospective backers – are they believable?