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Starting up a business of sales of goods/services? – Read on….

Once your business has already been up-and-running for two or more years, it is likely to be far easier to predict the success of future sale of goods/services – as you will have gained a wealth of experience and know-how, and have established a number of business and customer/client relationships.

Having accumulated various data and statistics over the years from your various successes and failures, you will be able to make comparisons and draw relevant conclusions – and therefore decisions will be much easier to make.  When you are just starting out, however, you don’t have any such data at your fingertips – and the nature of forecasting and planning for the future is quite different.

Adapted from an American article I found on the internet, here are three pointers if you are just starting out:

1. List your Sales Prospects

Consider any sales that are already in the pipeline, and estimate the probability of success for each account.  Update this information regularly.

As your business matures, you’ll get better at making these estimates.  (It may be the case, for example that if you have met with a customer you roughly have a 20% chance of “sealing the deal”, and if the customer has already agreed to a price, the chance may be 50%.)

2. Customer payback period

At the outset, the cost of customer acquisition (perhaps via networking, advertising, or other marketing methods), can only be a rough guess.  Once you have determined the amount you wish to invest in this, you can start thinking about how many months it will take to recover that cost through successful sales – ie. “the customer payback period”.

It is also advisable to consider how many customers you can afford to acquire with your existing capital or operating profits.

3. Sales made by more than one person

Once you have started generating profits, and you are endeavouring to forecast how much profit you are likely to make in the near future, you may find it useful to take your gross sales figure, and divide it by the number of people who had been engaged in making  the sales (ie. Colleagues, Partners, employees, etc.)  If the number of people involved in selling your goods or services, or in generating new clients/customers are subject to change, you should consider this when estimating future profits.

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