How to Forecast Sales Before Starting a Business

Three Parts:Conducting ResearchPredicting Sales FiguresFinalizing Your Projection

Projecting sales can be the most difficult part of writing a business plan. However, it is also one of the most important. You'll need sales figures to estimate how much working capital you'll need in the first months and years you are up and running. In addition, forecasted sales figures can help you get a business loan, assuming they are reasonable and backed by fact. Use the following steps to forecast sales before starting a business.

Part 1
Conducting Research

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    Start with figures from similar businesses or products. If you are starting a business in a field you have expertise in or knowledge of, start with that to determine your sales figures and price information. Even if you don't personally know this information, try talking to an industry contact who might be knowledgable. If you don't know much about the industry, try consulting with an accountant who is experienced in your industry and/or startups. This person can also help with financial projections.[1]
    • If you are unable to get any of these sources as a guide, try researching similar product or business launches. For example, if you are selling a piece of sports equipment, try look at similar launches of sports equipment in your specific sport and area.[2]
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    Obtain information from the Bureau of Labor Statistics (BLS). The BLS is a great source of industry information that you can use to estimate demand. Visit their website and look for documents that give you information specific to your products. Start with the most recent Consumer Expenditures report. Then, look at the "industries at a glance" section on the site. Finally, look at the Producer Price index. This will give a look at how stable prices are in your industry.[3]
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    Look for Census data. Visit the US Census website or your library to find census information in your area. You'll be able to locate specifics about the population, like income levels, household size, and ages. This information will be critical when evaluating the potential market for your product. The Census report may also contain sales information for business types in your area. Use this information if you find it, but be sure that it is up to date. If not, you will have to project the values for the current date based on historical growth.[4]
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    Investigate trade publications. Visit your library or search online to find trade associations and publications relevant to your industry. They will include sales figures relevant to your business, sometimes even broken into specific regions and products. However, you may have to pay for this information, so take that into consideration.
    • Trade associations also work to get and keep you in business, so take advantage of any other resources they offer.[5]
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    Talk to your vendors. Vendors, who sell you your inventory or supplies, probably also sell to your competitors. Try talking to them to get sales data for new companies that they have supplied. You can also talk to warehouses if your industry has high inventory volume. When getting information from these sources, make sure it is backed up with actual data. Otherwise, they must just be telling you a number so you'll buy.[6]

Part 2
Predicting Sales Figures

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    Determine a unit for calculating sales. Most businesses have sales that can be measured in units. These can be the number of products sold, number of hours billed to clients, or some other measurement of individual products or services sold to customers. For example, a pizza restaurant might measure sales in pies or slices. Figuring out a unit that can be used to measure one sale is useful for calculating sales volume.[7]
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    Identify your target customers. Work to define a market for your product or service. Who do you expect will have the desire and the money to purchase it? Look at specifics like gender, age, and income level. Then, use the census data you obtained to estimate the number of target customers for your product or service there are in your area. This is your target market.[8]
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    Estimate a projected market share. Once you've gotten your target market, you'll need to analyze your competition to determine how much of that market you can control. Again, this figure is an estimate, so talk to industry contacts and do your research to find out what numbers to expect. Remember that your market share will start low and then (hopefully) increase over the years.[9]
    • Try to estimate what piece of the larger market you will get by looking at sales figures for similar businesses in their first years of operation. Compare that data to the overall market size in that year to get their market shares. Then, average this data to get an idea of what market share you can expect.[10]
    • For example, imagine that for a particular year, you see that coffee shops in your area had, on average, $80,000 in sales in their first year of operation. Total coffee shop sales in your area for that year were $16,000,000. This means that new shops only had a 0.5 percent market share in their first year.
    • Multiply the 0.5 percent figure by total sales for the current year. You can then use this figure when estimating your projected sales.
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    Estimate sales frequency. Another key metric of forecasting sales is repeat business. Estimate how many times per year the average customer might need your product. For example, if you owned a grocery store, you might expect customers to return weekly. However, if you are starting a mattress store, you might only expect your customers to return once every few years.[11]
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    Forecast price per unit. Use market information to estimate several price points at which you might sell your product. Look at competitor's prices and adjust them to fit your product. For example, if your product is marketed as higher quality, your goal might be to sell it for a higher price to match. If you are selling multiple products, be sure to estimate prices for each. Make separate projected prices for the ideal price that you want and a worst-case scenario price. This will inform your high and low sales projections later.[12]
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    Predict sales using different approaches. If your sales cannot be easily broken down into units, there are other methods you can use to project sales. These methods still use industry averages to calculate annual sales, but do so using strategies more applicable to the industry. For example, a restaurant might project sales by multiplying the average number of occupied tables by the average revenue per table. For accuracy, this is sometimes split up into different meals or times of day.
    • Alternately, a retail store might project sales by locating industry data on average sales per square foot then multiplying that by their own square footage.[13]
    • For another example, a web store might project sales by estimating web traffic and finding data for average conversion rates (how often visitors to a site buy the product). This data could then be used to estimate sales volume.[14]

Part 3
Finalizing Your Projection

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    Calculate your sales. To forecast your sales, start with your projected number of customers. Then, multiply this number by the number of repeat purchases you expect each customer to make annually. Finally, multiply this by your per-unit price. The result is your sales forecast for one year.[15]
    • So, if you expected to have 2,000 customers, who returned on average twice per year, and your product costs $20, your projection would be 2000*2*$20, or $80,000.
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    Create high and low estimates. Make separate sales forecasts that take into account different possibilities. Focus on creating a pessimistic, or low, projection and an optimistic, or high, projection. Your pessimistic projection might include a lower sales price, slow market acceptance, and slower repeat business. Your optimistic projection should be the opposite, with higher than expected sales, quick market acceptance, and regular repeat business. The reality of your sales forecast is likely somewhere between those two extremes, so calculate them first and work from there.[16]
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    Project annual growth. Use the same tactics that you used above to extend your financial projections out to three years. This is the amount suggested for a business plan. Estimate your growth each year based on similar businesses and industry information. Again, make separate projections for high and low amounts of growth. You may also be able to project for a price increase after a few years. However, make sure that your growth projections are based in reality. Don't guess at high growth rates without any precedent to back them up.[17]
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    Account for expenses. If you want to make a truly complete sales forecast, you'll need to also factor in your per-unit expenses. This will help you to calculate an important sales metric, your gross margin. Gross margin is the difference between your revenue and the cost of goods sold (what you pay the buy the items you sell). Note that cost of goods sold does not include other costs like marketing or administrative costs, just the cost of the actual product or service itself. Estimate your per unit cost then multiply it by the number of units to get cost of goods sold.[18]


  • Try to get as much information as possible, by surveys or data available
  • Be realistic about what product or service are you offering to the market
  • Is very important to take into consideration the price you are charging for your product, that’s what drives most of the clients interest
  • Make sure your estimates are realistic. Get comparable scenarios or historical data to do so, or make a best case and a worst-case scenario if your estimation can considerably change the result of your forecast.


  • In sales is always safer to underestimate that to overestimate. Be aware of that.

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Categories: Buying & Forming a Business