Business plan Help needed.

Storymaker

Hi,
Can anyone help I need to estimate sales figures for a business plan but haven't a clue where to start. The product that I am selling will be a new product not yet available in Ireland in the form I hope to sell it in. It will be an online venture.
Thanks

PCPhoto

how do you intend to promote the product ?

you cant estimate sales unless you have a broad outline of potential clients (how can people be interested in the product if they dont know it exists)

Do some market research, get out on the streets with a clipboard and ask people would they be interested in X product, if so why...if not why not ? if so, how much are they willing to pay, would they purchase it if it was only available online ?

have you considered offering the product to companies/shops - to get a base order.

Admor Tony

I usually suggest looking at your potential market from a number of angles, rather than just one. That way you can more easily validate the sales numbers and be more certain they are realistic.
One way to do this is to:

1. Look at your market from the top down i.e. total number of potential customers e.g. what is the population in the area / city / country where you are trying to sell? What % of these might buy and how do you know this? What is the number of competing products sold currently (yours may be new but it is likely to have substitute products)?

2. Then do a bottom up. How many can you actually make in a week, sell in a week, deliver in a week or whatever?

3. Be realistic - too many people say they will sell say 12,000 in their first year and this is 1,000 per month - you will need to build up your sales in the early months and years.

4. Make sure you base your figures on facts rather than just quess work as you will be expected to have a clear written set of assumptions on how you arrived at your numbers. And don’t simply say the potential customer base is 100,000 and you will sell to an arbitrary 10% of these.

5. Sensitise your figures i.e. what would happen if your sales were half what you expected in Year 1, what if sales doubled? Both of these have a significant effect on profit but more importantly cash. Businesses fail due to lack of cash not lack of profit.

Finally, you may find it easier to consider and design your core 'Business Model' first, a process that focuses on identifying the key variables to make your business a ‘Commercial’ reality rather than a pipe dream. You can then use this to readily populate your Business Plan.

Tony

James 007

Very good points Admor Tony, but just a few queries

Admor Tony wrote: »

I usually suggest looking at your potential market from a number of angles, rather than just one. That way you can more easily validate the sales numbers and be more certain they are realistic.

Ok

Admor Tony wrote: »

One way to do this is to:

1. Look at your market from the top down i.e. total number of potential customers e.g. what is the population in the area / city / country where you are trying to sell?

This is fine

Admor Tony wrote: »

What % of these might buy and how do you know this?

How can you find out this?

Admor Tony wrote: »

What is the number of competing products sold currently (yours may be new but it is likely to have substitute products)?

This is fine

Admor Tony wrote: »

2. Then do a bottom up. How many can you actually make in a week, sell in a week, deliver in a week or whatever?

Ok

Admor Tony wrote: »

3. Be realistic - too many people say they will sell say 12,000 in their first year and this is 1,000 per month - you will need to build up your sales in the early months and years.

Ok

Admor Tony wrote: »

4. Make sure you base your figures on facts rather than just quess work as you will be expected to have a clear written set of assumptions on how you arrived at your numbers. And don’t simply say the potential customer base is 100,000 and you will sell to an arbitrary 10% of these.

Its very difficult to gauge your figures on facts, is it not?

Admor Tony wrote: »

5. Sensitise your figures i.e. what would happen if your sales were half what you expected in Year 1, what if sales doubled? Both of these have a significant effect on profit but more importantly cash. Businesses fail due to lack of cash not lack of profit.

Good point.

Admor Tony wrote: »

Finally, you may find it easier to consider and design your core 'Business Model' first, a process that focuses on identifying the key variables to make your business a ‘Commercial’ reality rather than a pipe dream. You can then use this to readily populate your Business Plan.
Tony

Yes, good avice all round

Admor Tony

James 007,

Thanks for the feedback. In response to your further queries:

What % of these might buy and how do you know this?
- How can you find out this?

A. Market Research (MR). Say you manufacture and sell garden furniture - find out total households from census / google / MR companies etc and estimate those with a garden, then use MR to find out how often they change their furniture (say every 5 years). This is the number who might buy from you.

4. Make sure you base your figures on facts rather than just quess work as you will be expected to have a clear written set of assumptions on how you arrived at your numbers. And don’t simply say the potential customer base is 100,000 and you will sell to an arbitrary 10% of these.
Its very difficult to gauge your figures on facts, is it not?

A. It is difficult to be absolutely accurate but your figures must stand up to scrutiny (be ready for Dragon's Den type questioning). Say in the above example, you calculate 1,000 people in your area might buy from you. Whether you will sell to 10%, 5%, 1% or whatever will largely depend on your application of the 5Ps of Marketing (Product, Price, Promotion, Place & People). The trick really is to show a clear process to get to your number. The bottom up process and the sensitivities will help prove your numbers are credible and as close to being based on facts as possible.