Your business plan is your calling card.
This is how you’ll be judged by potential investors and lending institutions.
It has to be expertly prepared and you need to be able to stand by every
projection.
The key word there is “projection.” For all
practical purposes, you’re making an estimate as to how your business will
perform. In the real world, those numbers can go up and down.
Predicting accurate sales
revenues could make all the difference with your potential investor. Those
numbers have to be realistic and rock solid. Here are the steps to take for
making accurate sales predictions.
Step 1: Expenses
You’ll need to put together the
list of fixed and variable expenses. These will include all the items you know you’ll be paying out for
on a regular basis such as office rent, equipment rent, payroll, electric,
phone and inventory (if applicable). You should also factor in the budget for marketing
campaigns. It proves you’re being realistic about your business expenditures.
Step 2: Income
Here is where you’ll be doing the bulwark of your predicting. How
can you estimate revenue when you haven’t sold your product or service yet? One
approach would be to analyze the competition. What kind of business have they
done in the past several quarters? If they are a public company you can find
that information easily.
You might also have experience from a previous job that can provide projected
sales figures. Your local Small Business Administration or Chamber of
Commerce might also be able to help you.
You should also analyze your own market. This is easier with a brick
and mortar type of store than with an ecommerce business. Think of your
business as a zone that attracts potential customers. What would be the average
amount of customers who would visit your store or site each day? Of that
number, what percentage would make actual purchases? Of that number, how much
would they spend? This is how you shape projections. You should always strive
to be conservative with those estimates so as not to over inflate your
company’s value.
Step 3: Do the
Calculations
Here the math is simple: You subtract your expenses from your sales
projections. That is your profit margin and it’s the number your investors will
be most interested in.
Whatever set of numbers you put into your plan you’ll need to make
sure you’ve got backups for them. This can actually be explained as part of
your business plan but it’s a guarantee you’ll be asked at some point, “How did
you come by these figures?” You want to make sure you have a responsible
answer.
