Quick-Launch Business Plan – Part 7

We’re going to talk about sales forecasting
now. You’ll see that in the handouts that accompany this program,
there’s a preliminary budget and sales forecasting spreadsheets.
All of that stuff is fairly easy to interpret, so I don’t need to spend
a lot on that. You’ll also see that there’s a 12-month sales forecast
for Anna’s business. It’s a basic template which basically says, “This
is how many of each product she’s going to sell per month at what price.
These are the costs. This is how much money this is going to generate.” If you are counseling somebody through their
business plan or if you’re writing your own business plan, sit
down and think about how many of these things. If I’m making something
or fixing cars, how many cars can I reasonably fix in
a day? What’s my average? Is it an hour? If I’m specializing in tune-ups, then it’s
sort of easy to predict that it takes about an hour to tune
up a car. If I’m fixing cars, it might take one hour to four hours
or even all day. I need to think through the process. Do I narrow my
niche a little bit? Do I say I’m only doing tune-ups and oil changes,
or am I doing exhaust systems or brakes? Am I changing cam
shafts? Am I doing valve jobs? Am I completely tearing down engines? All of those things are important. Then pick
some averages. Say I’ve got to pull and fix a transmission one
car a day on average, which will leave me three hours every
day to do tune-ups. I can see four customers a day. I know that a transmission job on average
brings in $400 and I know that a tune-up brings in $100. Can I
afford that? Next I need to figure out this sales forecast
so that I can figure out what bills associated with that.
If I’ve got to buy X number of transmission jacks and I need to
have $1,000 in tools to do the tune-ups, an engine analyzer which is
$1500, and I’ve got to pay my monthly payments on all of that equipment,
which is $300, then how many cars do I need to fix a day? This is why you
do a sales forecast. They are not difficult to do. They are simple
addition, subtraction, and multiplication. You need
to figure this out when you start a business. Let’s say you don’t
hit your sales goal for the day. You know tomorrow you’ve got
to sell more than you had to sell the day before. So you’ve got to start working on strategies
right away. It’s a nice benchmark that tells us where
we are in our process. This is very, very important, and it is easy to
do. Again, everything in business costs something.
while are selling something, it’s also costing us to
sell that. It costs us for the raw materials, marketing, and the tools
that helped us produce the product. Here is the raw data that shows how much I
can legitimately do in a day. If I’m mowing lawns, I can only physically
mow so many lawns in a day. How many can I do? Is that enough?
Does this justify the amount of money that I’m putting in this business?
Is it ever going to generate a wage for me? Or, if I can only mow one lawn
a day, can I charge enough to cover the cost of my equipment and make a
living? Be reasonable and explain the projections
briefly in the plan. It’s a plan, no one expects you to be able
to prove this. What you’re doing is working towards justification, not
proof. Take seasonal and personal fluctuations into
account. A lot of times we’re starting a seasonal business that
eventually grows into something greater. One of the reasons why
I’ve been using the lawn mowing business is that it’s very much a seasonal
business. We shouldn’t overlook seasonal businesses. Those
are important. They teach people about running a business. Some seasonal
businesses even make enough money so that you can kind of coast
a little bit in the winter. It also gets us thinking about, what are complimentary
businesses such as snow removal and fall cleanup. Something else
that uses similar kinds of equipment. Somebody that I was talking to
yesterday about a power scrubbing business said they have a power
washer and are cleaning cars with it. What happens in the
winter when people aren’t cleaning their cars as often? Maybe that’s a good time to be power cleaning
boats, right? This is a coastal community, and people have their
boats out of the water. It would be a great time to bring a boat by
or go by with your portable power steamer and steam those boats clean,
so they are ready for the Spring when they go back into the ocean. Again, think through the process, think about
your sales and how you’re going to do that. Once you’re done
with that, use the template or another sales forecast that you’ve got
off the web site. We’ll come back and we’ll talk about budget development
a little bit.

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