Now that you have talked to your major customers and compared your year-to-date actual sales to your budget, you are ready to determine your sales forecast for 2012. While it is tempting to take the easy way and just bump up this year’s sales by a set percentage, you will get more meaningful results if you put some additional thought and effort into the project. There are several techniques for arriving at a sales forecast and you will want to use all three and then set your budget where they intersect.
Technique number one for a retail business is to look at market statistics and see what the average sales volume per square foot of retail space. You can then apply this ratio to your own store. For other business types, the process is similar: look at average sales for the latest period available for your business sector. This will give you a baseline for your sales, but you don’t want to stop here as you may be comparing sales in Chicago to Boston to Kalamazoo and that isn’t accurate enough.
The next step in forecasting your sales is to determine for your specific location, how many households needing your goods live within say, 5 miles. How much will they spend on these items annually, and what percentage of their spending will you get, compared to competitors? Do the same for within larger distances (with lower sales forecast figures). (Use distances that make sense for your location and business type.) This step takes some time and research, but gives you additional accuracy.