Patrick E Alcorn ⋅ Arlington, TX Veterans Business Outreach Center ⋅ 20 years experience

If you have not already done so, visit your SBA resource partners at VBOC, SCORE, SBDC, WBC for FREE assistance with your business planning: https://www.sba.gov/local-assistance/find/?address=75209&pageNumber=1

Frank Tripi ⋅ Duxbury, MA Business Resource Inc (professional recruiter) ⋅ 45 years experience

Evann - check out Score.org as a source for information and professional advise. It is part of the SBA and provides totally free consultation and mentors for people like yourself.

Frank Tripi
frank.tripi@gmail.com

Joe Pierce ⋅ Jonesboro, AR Husqvarna Outdoor Products ⋅ 30 years experience

Hi Evann
Depending on the business and the area of the country city etc you may be able to use statistics from RMA Robert Morris Associates
RMA lists average sales by IDCO in regions along with other financial data I would at least look into it

Cary Grossman ⋅ Houston, TX Shoreline Capital Advisors ⋅ 40 years experience

As I understand it, this is a startup. I'd consider breaking it down by customers that you intend to target and potential sales to each target. Then probability weight both the customer wins and the sales per customer (and by month of year). Not too much more you can with a startup. The exercise forces you to be practical about win ratio, how long it takes to make the sale and the timing that sales will begin and ramp up.

Richard Gauger ⋅ West Chester, PA ⋅ 35 years experience

Hi Evann,

Thanks for your service. Given the absence of any details about your business model, I think the previous answers all offer good guidance. Can you give us any additional information about your type of business?

Mike Grayson ⋅ Mckinney, TX FTI ⋅ 45 years experience

If you want credible data and have less than 12 months of sales history, the honest answer is that you can't. If you lack 12 months of history, it's a wild - and sometimes very wild - guess. So, you have to accept that and make it clear by educating those who would take those numbers and make decisions based on them - which could be risky and is often catastrophic.

So what should you do? The first step is to watch your sales like a hawk. Summarize every week and every month. Then analyze the heck out of it. Who is your biggest customer? Who had the most sales? Are any results unexpected? If so, in a good or bad way? What marketing is working the best? Are you measuring marketing results in a tangible way?

You MUST have systems in place that allow you to quickly summarize and analyze sales.

The second step is to make sure you have a very solid MARKETING STRATEGY. (In reality the marketing strategy should be the first thing done BEFORE you spend your first dollar to start your company). What do I mean by marketing strategy? Here's a story I use to explain:

MARKETING STRATEGY:

Once upon a time a man was in search of a suit. He first went to Walmart because he knew they would have the best price. To his surprise, the suit was of reasonable quality and made by a well known manufacturer. But when he asked about custom fitting they said they didn't have anyone who could do that and while the material the suit was made from was ok, he really wanted something a bit better - even though they had the best price.

The man then decided to go to Nordstrom. He found a much better quality of material and craftsmanship ​- and they did custom alterations. He was impressed with their customer service, even though it cost a bit more. Then, he began thinking about the fact that he was going to be getting married in the suit and wanted it to be perfect.

​So, the man went to a tailor who had a reputation for making suits for celebrities and well known political figures. He went in and got to choose the material, even the lining. He was measured for every facet of the suit - and the suit was designed so well that it didn't even leave a bulge where he kept his cell phone. It cost much more, but it was exactly what he wanted.

​The moral of the story is that there are only 3 types of marketing strategy:

- Operational Excellence (Walmart, Microsoft)
- Superior Performance (Nordstrom, Apple)
- Customer Intimacy (custom tailor, custom cars, hair stylist).

Which one is your company? You MUST know before you proceed. Notice that in the story, they all sell the same product, a suit, but the desires of the customer they've targeted, and what they offer are completely different.

​Contrary to popular belief, the first step of developing a marketing strategy is not sitting down with the customer to determine what they want. The first step is to determine the product or service you are going to offer - and which marketing strategy you will pursue. The marketing strategy will impact every decision your company makes. For example: an ad for men's suits from Walmart is going to be very different from Nordstrom. And their operation will be totally different in terms of different distribution systems and the employees they hire.

Next up INNOVATION. I could spend a whole bunch of time talking about what this means but besides marketing, innovation is the most important work of the business.

Jai Chotalia ⋅ Hermosa Beach, CA Visa, Toyota/Lexus, & Disney ⋅ 12 years experience

Evann, all great responses here! I'd like to add that you can Google forecasting modles filetype:xls and you will get a Excel templates that may help you.

If you can't find them let me know, I'll be happy to send you some of my FP&A files.

Jai

James Yaple ⋅ Austin, TX Department of Veterans Affairs ⋅ 25 years experience

All you financial documents will generate off of your sales projection, so it's important. Determine your methodology and explain it. It's a great tool for evaluating opportunities and choices. Make your estimates reasonable. There are multiple ways to validate your projections.

For example, starting a bakery. Are you going to have a storefront or sell through grocery stores and other outlets. Physical storefront: Most of your customers will come from a five-mile radius. How many houses/apartments/etc. are within that radius? Some people call this variable "rooftops" . Lets say there are 5,000 rooftops within that five mile radius. They probably need one or two loaves of bread per week. If you captured 100% of the market, you might sell 600-700 loaves per week. If your sales projections say 1000 loaves per week that will raise eyebrows and scrutiny. Your numbers need to be reasonable and comparable with similar businesses.

The methodology is highly variable and your numbers will be guesses, but guesses have to be reasonable or they won't pass muster. What are you going to deliver better, faster, cheaper than your identified competitors?

If you identified what type of startup it was, you would probably get more specific responses .

Good luck and thank you for your service.

James Watters ⋅ Norman, OK Business Consultant, retired ⋅ 17 years experience

Don’t spend a lot of time worrying about your estimate. All sales plans are guesses because they deal with the future and nobody knows the future. And whatever estimate process you use have comfort in the knowledge the your business will either fall short of the estimate or overshoot it. What type of product and / or service is the company selling going to sell?

There are ways to estimatemarket potential based on government publications. The Bureau of the Census publishes “Consumer Expenditure Surveys for various products. In many states report sales tax collected by various product groups. They are all estimates and that’s okay.

Another approach is to project the company net income for the 12 months your company begins. For example, the business owners want to earn (Net Income) $75,000 the first of the year. Ok, hard part is over. Now use the format of an income statement and work backwards to see how much sales volume is required to produce the net income goal. When you plan the business this way, the focus is on the bottom line and not some mystical sales goal.

Net Revenue. $
Less cost of goods sold. $
= Gross Profit. $
Less operating expense. $
= Operating Income. $
+/- other Income or expense. $
= Pre tax Income. $
Less income tax. $
= Net INCOME. $ 75,000

[I hope all the spacing comes out ok]
Now what would be the federal tax rate on $75 thousand? Let’ say it is 17%. Then the Pre Tax Income = Net Income divided by (1-.17) or .83.
&75,000 / .83 = $90,361. ( 90,361 x .17 = 15,361). $90,361 - 15,361 = $75,000

Finish working backwards and you’ll will arrive at the sales volume needed to generate the desired bottom line.

Have fun.

Jeremy Serwer ⋅ Woodstock, CT The Serwer Company, LLC ⋅ 30 years experience

Hello Evann,

To expand on Mr. Carpenter's helpful response . . .

Depending on the business, vendors/suppliers will have an idea of competitors' sales. Perhaps your network of these and other related marketers, etc., within your industry, could supply sales information they've gleaned from those to whom they'v provided products or services.

These types of "comps" are typically very helpful.

Good luck!

Jeremy

Emanuel Carpenter ⋅ Alpharetta, GA SDR Master Class ⋅ 20 years experience

Evann - Great question. I've been there. When applying for an SBA-backed loan, the SBA requires that you complete a one-year month to month projected cash flow statement. While a lot of what you project will be pure guesses, you can also use data based on how similar businesses in the same space are doing in the marketplace or based on how successful your current team has sold products and services at other businesses.

If you visit Yahoo! Finance (finance.yahoo.com), you should be able to find financial statements of companies similar to the one you're starting. You can base your financial projections on their actual financial statements, even if your projections are just a percentage of their actual numbers.

Hope this helps.