Week 2 - Sales Forecasting

Sales Forecasting Tips

A common approach for those new to business planning is to try and construct sales forecasts based on estimating how many individual products or services they will sell. This creates a dilemma if you have dozens of different products.

A better way is to forecast the number of customers you expect to attract, and group them by how much they spend per transaction or visit, and how often they visit. The model provided can handle either approach, but if you use the customer forecasting approach and your business falls behind on sales, you can compare actual customer behavior with your plan and adjust accordingly.

Another tip is to estimate the Cost of Goods Sold, (COGS for short), as a percentage of what you pay for what you offer. As an example, if you sold oil changes you would figure out all your costs and then what price you charge. Dividing the cost by the price gives you the % of COGS.                                                                                                                              

                Cost = oil $8.50 + $1.00 rags + $4.25 filer + $6.00 labor = $19.75
                Price = $30

                The COGS would then be  $19.75/$30 or 65%                                                                                                                                                                                                        

The reason this is useful, is because the percentage often tells you the price is too low or cost is too high. In the above example, losing 65% of every dollar to costs is high! So seeing that, you might go back and double check your cost estimates or consider raising your price.

Again, the model can handle direct costs or using a %, up to you!