Sales forecasting for your startup

Most of the smaller and early stage startups do not take Sales Forecast for their businesses seriously. Your sales forecast also forms the backbone of your business model. Without a sales forecast for your Startup you cannot get the real picture of cashflow (expenses, profit and growth). Remember, Cash is the key to keep your Startup afloat! Read the full post HERE

Forecasting is usually easier when you break your sales down into manageable parts and then forecast the parts. Estimate your sales by product line, month by month, and then add the product lines for all months. Project monthly sales for the first 12 months and annual sales for the following three years.

What you need to do?

[Read ‘Economics of your Startup’ and you can send request for the FREE Template]

1: Develop a customer profile based on their demographics and determine the trends in your industry/domain. Make some basic assumptions about the customers in your target market.

2: Develop an in-depth profile of your target market. Use available statistics and research data to determine the general characteristics of this market. You can do some primary research, like user survey to determine unique characteristics about your target market.

3: Prepare Competitors profile already doing business in your target market. Prepare detailed competitors analysis, which will help you in your product/service positioning, pricing, innovative promotional techniques among other things.

4: Estimate your sales for your first year. The basis for your sales forecast can be the average monthly sales of a similar-sized competitor’s operations who is operating in a similar market. Be sure to reduce your figures by a start-up year factor of about 50% a month for the start-up months. Using your research, make an educated and rational guess at your potential market share. For example, if the size of the market is 1000, and your Startup is targeting at capturing 10% of the market (100 customers), I will recommend you to keep it conservative and reduce your figure by approximately 15%.

Don’t expect your sales forcast to be perfect, just make it reasonable. All it takes is good working knowledge of your Startup, and not advanced knowledge of finance or complex mathematics. Once you get hang of numbers, you are going to enjoy them!