How do you not miss on sales forecast?
Hello, this is Irino, a strategy consultant.
I often get a question like above from people who I’m assisting with their business plan documents. I will briefly list the points to remember.
Procedure 1 : Come up with a few different formulas for “sales volume=”
For example,
| sales volume = | client segment 1 + client segment 2 + client segment 3 + … |
| = | distribution channel 1 + distribution channel 2 + distribution channel 3 + … |
| = | product 1 + product 2 + product 3 + … |
| = | market size x share rate |
| = | average customer spend × seating capacity × turnover number |
| = | sales volume per employee × number of employees |
| = | productivity of a facility × number of facilities |
| = | number of keyword search × click ratio × conversion rate × product unit price |
Everybody has at least one formula in his head. However, you need many formulas as possible.
Procedure 2 : Solve the contradiction of equations
For example, I sometimes come across business plan documents like this.
| The first year sales volume = | market size of 10 billion yen × 5% share = 500 million yen |
People who have worked for big companies tend to write something like this in their business plan documents. However, they will realize the mistake with another equation as follows.
| The first year sales volume = | first client 100,000 yen + second 1.1 million yen + third 900,000 yen + … |
| = | at most 50 million yen |
This happens because some people lack knowledge of:
- how hard it is for a starting business to get the first customer
- how much effort they need to make sales from each customer
- how difficult it is for a starting business to get a 5% share
In order to prevent this type of mistake:
| The first year sales volume = | market size of 10 billion yen × 5% share |
| = | first client 100,000 yen + second 1.1 million yen + third 900,000 yen + … |
Please write a number of different formulas like this. It becomes easier to find contradictions in your sales forecast.
Even so, it’s impossible not to miss on your sales forecasts. Even if you think hard and come up with many formulas like mentioned above, your sales forecasts are meant to miss more or less.
- Market needs were not that strong.
- Products were not attractive enough.
- Humans tend to be optimistic about making plans.
Putting these reasons aside, sales forecasts are meant to fall below the figures of sales forecasts by rule of thumb. This has been tried and tested in venture and consulting industries. Venture capitals say that even if those companies achieve only 50% of their sales plans, they are excellent enough. So as a practical guide, what I want to suggest is:
- Do your best so you will not miss your sales forecast.
- Figure out a way of surviving even if you only achieve 30% of your plan.
That’s it for today.
Irino
- A celebrity entrepreneur
- A managing director in a listed company
- A professor
- A rocket scientist
Looking forward to working with excellent leaders.
Please contact:
iphone: 090-6497-4240
irino@linzylinzy.com (Irino)
- One-two finish in the largest business plan contest in Japan
- One-two finish in Asian Entrepreneurship Award
- No.1 in google "business plan"
- Judge in the Cloud-Computing Awards
- Write/Review +100 business plans a year
- Meet +300 entrepreneurs a year
- Large-scale project management
e.g. +15,000 man-months post merger integration - Expertise: business planning, financing, IT, project management
- Fortune Global 500 companies:
bank, brokerage, card, SIer, etc - Startups:
IT, cloud, bio, cosmetics, minor metals, aerospace, etc - Tokyo University -> University of British Columbia -> Oracle -> Headstrong -> Independent