One of the first things a MBA major learns
is the importance of a well-crafted business plan. A key component of that plan
is forecasting revenues. This is essential if you're going to be looking for
investors in advance of a company launch. Those investors will want to know how
and when their money will be coming back to them. Here are the steps to follow
to forecast revenues for a company launch:
Step
1: Determine Your Operating Costs
What will it cost to keep your business
open? Factor in everything from rent, insurance, salaries, office
supplies, marketing, manufacturing (if applicable) and miscellaneous expenses.
Those will be your operating costs. You'll then have a profit margin on every
item you sell. That accumulated margin needs to be deducted from those operating
costs.
Step
2: Create a Customer Profile
Who are you selling to? By creating a
customer profile you'll be able to anticipate shifting trends in your business.
You'll also know where to target your marketing campaigns. The majority of
laundry detergent is sold to the moms who do the shopping and the advertising
reflects that. There is a business adage that goes, "20% of your customers
account for 80% of your sales." That's why you really have to understand
who you're selling to in order to make an accurate forecast. You'll be
depending on those profiles to be accurate.
Step
3: Determine the Reach of Your Campaign
If you're opening a neighborhood storefront
then you should know what to expect in terms of foot traffic or customers
traveling to your store. However, with an online business your reach could
truly be global. How will you know how far that reach can go in order to make
an accurate prediction? This might come down to a matter of marketing
penetration. For instance, if you're going to advertise on Facebook then you'll
be able to know what type of click through rate to expect. You can build a
forecast utilizing that information.
Step
4: Size Up the Competitive Landscape
Chances are that whatever business you're
starting up, somebody has already beaten you to the punch. That's a good thing
because you can learn a lot by studying your competition. If you can find out
what type of sales they achieved you should be able to make comparable
forecasts.
Step
5: Add it Up
Now that you have all of those numbers
you're ready to make a forecast. The best approach is to provide conservative
and logical forecasts backed by data. Being conservative means erring on the
side of caution and embracing the "worst case scenario" when it comes
to sales.
