Sales Forecasting For New Business

Sales forecasting is the process of organizing and analysing information in a way that makes it possible to estimate what your sales will be. This Micro Module outlines some simple methods of forecasting sales using easy to find data. Books containing simple and sophisticated techniques of forecasting sales can be found in libraries and business oriented book stores.


There are many sources of information to assist with your sales forecast. Some key sources are: Competitors; Neighbouring Businesses; Trade suppliers; Downtown business associations Trade associations; Trade publications; Trade directories;

Factors that can affect Sales can be divided into external and internal influences. Examples of these are:

Seasons; Holidays; Special Events; Competition, direct or indirect Competition, External labour events; Productivity changes Family formations; Births and deaths; Fashions or styles; Population changes; Consumer earnings; Political events Weather

Product changes, style, quality; Service changes, type, quality; Shortages, production capability; Promotional effort changes Sales Motivation plans; Price changes; Shortages, inventory; Shortages/working capital; Distribution methods used Credit policy changes; Labour Problems

Creating a sales forecast can be divided into four steps.

Step 1
Develop a customer profile and determine the trends in your industry.

Make some basic assumptions about the customers in your target market. Experienced business people will tell you that a good rule of thumb is that 20f your customers account for 80f your sales. If you can identify this 20ou can begin to develop a profile of your principal markets.

Sample customer profiles:

Young families, parents 25 to 39, middle income, home owners.


Determine trends by talking to trade suppliers about what is selling well and what is not. Check out recent copies of your industry’s trade magazines. Search the Business Periodicals Index (found in larger libraries) for articles related to your type of business.

Question: What are five customer profiles for your business?

Question: What are some customer trends for your customers/clients?

Step 2
Look at the area where you will be trading

Establish the approximate size and location of your planned trading area.

Use available statistics to determine the general characteristics of this area.

Use local sources to determine unique characteristics about your trading area.


Estimating the number of individuals or households can be done with little difficulty using national census data to be found at your library or town hall. Your local statistics office or chamber of commerce can identify what the average household spends on goods and services.


Question: What are the statistics on the people in your area?

Step 3
List and profile competitors selling in your trading area.

Refer back to the data you collected in your market research.

Get out on the street and study your competitors. Visit their stores or the locations where their product is offered. Analyse the location, customer volumes, traffic patterns, hours of operation, busy periods, prices, quality of their goods and services, product lines carried, promotional techniques, positioning, product catalogues and other handouts. If feasible, talk to customers and sales staff.

Step 4

The basis for your sales forecast could be the average monthly sales of a similar-sized competitor’s operations that are operating in a similar market. It is recommended that you make adjustments for this year¹s predicted trend for the industry.

month for the start-up months.


Consider population and economic growth in your trading area.


Further tips
Sales revenues from the same month in the previous year make a good base for predicting sales for that month in the succeeding year. For example, if the trend forecasters in the economy and the industry predict a general growth of 4or the next year, it will be entirely acceptable for you to show each month¹s projected sales at 4igher than your actual sales the previous year.


Summarize the data after it has been reviewed and revised. The summary will form a part of your business plan. The sales forecast for the first year should be monthly, while the forecast for the next two years could be expressed as a quarterly figure. Get a second opinion. Have the forecast checked by someone else familiar with your line of business. Show them the factors you have considered and explain why you think the figures are realistic. Your skills at forecasting will improve with experience particularly if you treat it as a “live” forecast. Review your forecast monthly, insert your actual, and revise the forecast if you see any significant discrepancy that cannot be explained in terms of a one-time only situation. In this manner, your forecasting technique will rapidly improve and your forecast will become increasingly accurate.

About the author:
Ben Botes is an author, entrepreneur and expert speaker on new venture creation. He is also the founder of http://www.my1stbusiness.coma web portal for 1st time business owners and entrepreneurs. Visit today for the most extensive range of small business resources, courses, articles and tools. Contact;