How does one project sales for a biz plan?

[BellaPippin]

Hey all,

Any basics or resources on how to project some rough sales for a basic biz plan? I keep googling and googling and all I find is "How to project sales: Step 1: Make a unit sales projection". Not sure if I don't know how to read or that really is just taking me in a circle. I can decide on an unit price but then I'm stuck again in how to guess how many people could potentially come into my store and buy per month/day, year, etc.

Where could I find data to have an idea of sales projection for products in the scrubs, skin lotion, skin care type of industry?

Thanks!


Bel

 

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[Empires]

Expected store/website traffic x expected conversions x revenue per sale = expected sales was the method I used. (Doesn't account for repeat sales though)

To calculate your stores traffic you need to estimate how many people will see your marketing and then estimate how many of those people will come into your store.

So say you put an ad in the newspaper for the week, which 10,000 people see, and 10% of them use skincare products. Of those 1000, 15% visit your store, and of those 150, 75% make a purchase. And I'll just use $50 as the average revenue per sale.

150 x 75% x $50 = $5265 in revenue for that week.

Hopefully that helps.

Maybe this will help you: How to Build Realistic Sales Projections for Your Startup - ProjectionHub

 

[AdamMaxum]

I don't have any resources for you, but most business plans are all BS with a good sounding explanation on the metrics behind a complete guess. My advice would be to look at businesses comparable to the one you're writing the biz plan for and pull data from them if available somehow. You can also find industry stats and reference those.

For an online business it's easier to do because you can do what @Empires said above more easily. For offline, it becomes a lot more difficult.

 

[BellaPippin]

Thanks for those responses. It's a good start and that example gave me an idea of where the numbers are coming from.

I'm just trying to take an educated guess at whether I'd be hopefully breaking even or running at a deficit if I rent retail space. I have an idea in mind for social enterprising so I need a physical spot but revenue could also come from an online store.

 

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[MJ DeMarco]

Estimate cost per thousand impressions, say $20.
Estimate click through rate per 1000 impressions.
Estimate conversion ratio per click thru.

$20 CPM
5% click rate
10% conversion rate

So if you spend $200 you'll receive 10,000 impressions, 500 clicks, and 50 sales.

Put your rates (CPM/CTR/CR) above at industry averages and you should be OK for your estimate.

 

[Millenial_Kid5K1]

It's gonna be all guesswork if you're just starting.

Once you have some sales numbers, there's all kinds of projection methods you can use. I got my hands on a textbook a while back called 'forecasting: methods and applications', by Makridakis et al. I originally bought it for slowlane purposes, but now I'm planning to use some basic methods from it for inventory planning.

 

[AdamMaxum]

Estimate cost per thousand impressions, say $20.
Estimate click through rate per 1000 impressions.
Estimate conversion ratio per click thru.

$20 CPM
5% click rate
10% conversion rate

So if you spend $200 you'll receive 10,000 impressions, 500 clicks, and 50 sales.

Put your rates (CPM/CTR/CR) above at industry averages and you should be OK for your estimate.

I would be shocked if someone could get 50 sales for $200 using a CPM display ad network.

 

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[MJ DeMarco]

would be shocked if someone could get 50 sales for $200 using a CPM display ad network.

I just threw the #'s together. I assumed the CPM was targeted, like something narrowly focused at FB, not some generalized display ads. To be honest, I haven't spent a fortune on advertising anywhere in years, so I no longer know what "averages" are any longer.

 

[G-Man]

Thanks for those responses. It's a good start and that example gave me an idea of where the numbers are coming from.

I'm just trying to take an educated guess at whether I'd be hopefully breaking even or running at a deficit if I rent retail space. I have an idea in mind for social enterprising so I need a physical spot but revenue could also come from an online store.

I have an excel based model that I use to project sales, working capital, P&L + Balance Sheet out 3 years. It's the most robust desktop model you will ever see for a business with under $50M

It's also complete bullshit.

Well, not complete, but it's based on customer and unit velocity projections that are ultimately just guesses, because the business is young, small, and in a sales growth mode.

I basically make legitimate sounding guesses. Instead, here's how I would approach it:

• Assume zero sales.
• Find out your burn rate.
• with $X invested, burned at $X/month, how many months do I have?
• Is that enough time to find out if the business is viable?
• Can I limit my losses and protect my credit if in X months, I've burned my cash and it's not viable?

If the answer to the last two questions is yes, and you're ok with the financial risk (it okay to throw up in your mouth a little, just not full on convulsing), then take an educated chance.

Also, once you've been through that process and figured out your burn rate, test the reasonableness of all assumptions. Maybe you'll find out rent is going to cost more than you think. Maybe you'll find out you can do it without renting a space after all. When I'm done with my forecasts and come back to them after a weekend or something, I always find at least one turd on the lawn.

 

[BellaPippin]

(it okay to throw up in your mouth a little, just not full on convulsing)

lmao!

Thanks, that was a very reasonable approach to it. Super helpful.

 

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[ZCP]

How many have you sold to date?

 

[BellaPippin]

How many have you sold to date?

None, I just had the idea for the business and I'm trying to put together a simple business plan to have some numbers. But the product is basically skin care stuff, I just don't know where one would find typical industry numbers.

 

[ZCP]

So your dilemma is answering your question.

Go sell some.

How many people did you talk to to sell one? Five? Ten?

Come back to the thread when you have proven a need / that someone will buy one.

 

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[BellaPippin]

So your dilemma is answering your question.

Go sell some.

How many people did you talk to to sell one? Five? Ten?

Come back to the thread when you have proven a need / that someone will buy one.

Your comment was as rude as it was unhelpful. People come to this forum at all stages of their projects to ask for good advice from people who have been there and can (and want to) throw some input. I've gotten excellent advice from excellent people here. I posted because I've been doing research on my own and I could still use some help to simplify concepts. If you don't have anything helpful to contribute to the thread you can just skip it, you know.

 

[MJ DeMarco]

Your comment was as rude as it was unhelpful.

It could be interpreted that way, but it was NOT unhelpful.

He's simply alluding that the number search might be action-faking and that the real meaningful data comes from engaging the marketmind with your product. Let them give you the data you need-- it will be 1000X better than any projection made in a vacuum.

Everything else is conjecture and likened to solving the Drake equation -- too many unknowns; the medium, the message, the brand, the reach, the USP, I can go on and on. This is why I feel most business plans are a waste of time.

Good luck.

 

[BellaPippin]

It could be interpreted that way, but it was NOT unhelpful.

He's simply alluding that the number search might be action-faking and that the real meaningful data comes from engaging the marketmind with your product. Let them give you the data you need-- it will be 1000X better than any projection made in a vacuum.

Everything else is conjecture and likened to solving the Drake equation -- too many unknowns; the medium, the message, the brand, the reach, the USP, I can go on and on. This is why I feel most business plans are a waste of time.

Good luck.

Mr. DeMarco YOUR explanation is helpful. There's a lot of people who know a lot but aren't precisely the best teachers.

I'm not action-faking and I was pretty sure some people would see it as such when they saw me post this. I do understand a business plan is just guessing. I had this idea to put together a retail front with a social service operation in the back-end. I'm just hoping for a basic "educated guess" that would help me understand how much product I need to buy/make to have on stock or on display, at least for the first month. How many I would need to sell to make rent, stuff like that. I know after that it's all adjusting according to the feedback. With a basic number structure, however, I might actually get lucky and get someone to invest in my idea for that first month. Or at least that's what I'm hoping lol.

Thanks for your time. <3

 

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[jon.a]

Mr. DeMarco YOUR explanation is helpful. There's a lot of people who know a lot but aren't precisely the best teachers.

I'm not action-faking and I was pretty sure some people would see it as such when they saw me post this. I do understand a business plan is just guessing. I had this idea to put together a retail front with a social service operation in the back-end. I'm just hoping for a basic "educated guess" that would help me understand how much product I need to buy/make to have on stock or on display, at least for the first month. How many I would need to sell to make rent, stuff like that. I know after that it's all adjusting according to the feedback. With a basic number structure, however, I might actually get lucky and get someone to invest in my idea for that first month. Or at least that's what I'm hoping lol.

Thanks for your time. <3

I'm a commercial landlord. With that explanation you wouldn't even get your call returned. Well, my agent might (he seems to talk to everyone) but he wouldn't bother me with the lead.

 

[Andy Black]

I also don't think @ZCP was being rude @BellaPippin.

Make a sale first?


On the subject of gathering data... I prefer "real-time market research".

Sometimes I literally sell people on our marketing services by explain that we don't create complicated Excel models to try and predict sales volumes.

I explain that, by the time we've created this complicated model based on assumptions, that's going to come up with incorrect predictions anyway, we could have engaged the market and got *real* data.


Here's couple of posts on this:

• Launch & Learn
• The Biggest Benefit of AdWords

And here's a more geeky post specific to what I do:

• How to get profitable or fail fast with AdWords

 

[BellaPippin]

I also don't think @ZCP was being rude @BellaPippin.

Make a sale first?


On the subject of gathering data... I prefer "real-time market research".

Sometimes I literally sell people on our marketing services by explain that we don't create complicated Excel models to try and predict sales volumes.

I explain that, by the time we've created this complicated model based on assumptions, that's going to come up with incorrect predictions anyway, we could have engaged the market and got *real* data.


Here's couple of posts on this:

• Launch & Learn
• The Biggest Benefit of AdWords

And here's a more geeky post specific to what I do:

• How to get profitable or fail fast with AdWords

Thanks Andy. Seems you agree that an approach like @G-Man would be more useful. I'm imagining how I could engage an audience in the context of my idea before I even get to the real storefront. Maybe I can start online and see how many people are willing to purchase for the cause, and even build some anticipation of the real storefront. Even some crowdfunding would also be some good proof of concept.

 

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[ZCP]

?....... If you don't have anything helpful to contribute to the thread you can just skip it, you know.

You asked how to project sales. I asked if you had sold any. Then asked how many people you talked to to make those sales. Is there a better way to predict sales than sales?

A challenge to you: come back to this thread a year from now and explain to me how my reply was unhelpful. I agree, it was far from coddling. Explain to me then how it was unhelpful and I'll send $100 to the charity of your choice.

 

[BellaPippin]

A challenge to you: come back to this thread a year from now and explain to me how my reply was unhelpful. I agree, it was far from coddling. Explain to me then how it was unhelpful and I'll send $100 to the charity of your choice.

I don't need a year to figure out why. My original post asked for some basic clarification on how to project sales within the context of a business plan. Whether you think a business plan is useful or useless wasn't really up for discussion. I don't know if there's a better way to predict sales than sales, but there's definitely ways to project sales on a business plan and that's what I was asking for, and many people contributed good starting points without kicking me out of the thread until I had sales. Now thanks to them I have a better understanding of the concepts the articles I read about were mentioning. If yours had been the only answer, I would be in the same spot, and that's why it was unhelpful.

You can donate here: unachicago --we're trying to fund a refugee school in a war camp for a year.

 

[Ariel Davis]

I just threw the #'s together. I assumed the CPM was targeted, like something narrowly focused at FB, not some generalized display ads. To be honest, I haven't spent a fortune on advertising anywhere in years, so I no longer know what "averages" are any longer.

Digital media buyer (by day) here! I work on campaigns ranging from department stores and restaurants to medical centers and auto dealers. Here are some display ad basics for my Fastlane friends advertising online.

CPMs: In general, most display ad CPM's range from $1.50 to $3 depending on your targeting. More local campaigns (especially those targeting specific zip codes rather than DMA's or national campaigns) or campaigns with very specific targeting (say men who sew) tend to come in at higher CPMs than more broad, inclusive targeting.

NOTE: CPM (cost per 1,000 impressions) has more to do with "targeting specifity" rather than the subject targeted itself. This is because display ads are bought in a real time ad auction much like an auto collectors auction. If there are plenty of ad opportunities available based on your targeting (like Chevy; not impossibly specific), then you'll win the auction at a lower CPM. If there are only a few impressions applicable to your targeting (very specific - like a neon green, 1960's t-top Chevy Camero with white racing stripes), then you better be out front with top dollar if you want to win that impression.

CONVERSIONS: Conversion rates vary because they are subjective. It depends on what the advertiser considers a conversion. Sometimes lower funnel activities, not just the actual sale counts. In general, conversion rates hover around 3% but this also improves with time as the campaign evolves through insights and optimizations.

CTR: Lastly, CTRs come in around .1-.3% and anything much higher could be an indicator of fraudulent traffic or bots. Also, higher CTRs usually have an inverse relationship to conversions. In other words, clicks aren't everything!

When buying display ads, purchasing on a CPM basis with an activity goal (vs a CTR goal) will get you the most bang for your advertising bucks. It's also advisable to A/B test and review your campaign several times a week. Prune anything that's not contributing to your bottom line.

If I can help out with anything display ad related, please feel free to reach out.

 

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[BlakeRVA]

While in college I developed a bullet proof system for generating projections on business plans:

Step 1: Raise hands in the air with open palms
Step 2: Clench palms together
Step 3: Generate numbers
Step 4: Justify, justify, justify

In all seriousness, the reality with sales projections is that your guess is about as good as anybody elses. Ultimately what investors and banks are looking for is to see if you've actually thought through this business idea. If you can come up with a logical explanation and strategy for attaining your numbers then you'll likely pass the test. Hope this helps.