Forecasting sales for a new venture can feel like shooting in the dark. You don't have historical data to reference, and you might not be sold on the process's practicality until you have some.
It can be hard to make forecasting a priority when you're dealing with the other trappings and responsibilities of starting a new venture. But you have to think about the big picture.
Sales forecasting informs factors like the amount of capital you need to raise to get your venture off the ground, how you can sway potential investors, inventory management, and setting your marketing budget. But the process can be just as imposing as it is necessary, and it often requires a lot of "filling in the blanks" to account for your venture's lack of historical data.
Here are some sensible strides you can take when forecasting sales for a new venture.
Forecasting Sales for a New Venture
Establish a process for your sales team.
Identify and research products similar to yours.
Conduct industry research through trade publications.
Talk to vendors.
Talk to others in your industry.
Make both ideal and not-so-ideal forecasts.
1. Establish a process for your sales team.
Determining the sales process your team is going to employ is a critical first step to providing context for your sales forecast. It allows you to keep your sales team on the same page and gauge the likelihood of deals closing — two factors central to understanding the revenue you can expect to generate going forward.
The success of your sales process will also inform other aspects of your sales operations like quotas — another figure that can help you construct your sales forecasts as your new venture expands.
2. Identify and research products or services similar to yours.
Unless your product or service is a bold, unprecedented, revolutionary innovation that no one can possibly wrap their head around yet, you'll likely be able to find something similar to it. How that product or service has fared in recent years can be a valuable benchmark for understanding how your offering is going to sell initially.
If you're selling a new type of electric bicycle, don't assume that your product is going to storm the market, sell astronomically better than your competitors, and upend the entire landscape of cycling right away. See how similar electric models have sold and who they've appealed to. That can be a solid starting point for pinning down how your product might hold up in its early days.
3. Conduct industry research through trade publications.
Forecasting for a new venture means gauging projections without previous data. As I said earlier, it's going to be on you to feel out enough information to fill in the blanks. The basis for all of that comes with a thorough understanding of your industry's landscape and what similar businesses have dealt with.
Your industry's relevant publications can be excellent resources to find the data necessary to support accurate forecasts for your new venture.
4. Talk to vendors.
Your vendors often have valuable experience and relevant information regarding your industry and how companies similar to yours have fared. On top of that, they have a vested interest in your success — if you thrive, you'll generally rely on them more. But be careful here, they might be inclined to just tell you what you want to hear in the interest of keeping you happy and landing your business.
5. Talk to others in your industry.
Your peers can give you perspective on industry trends and some insight about their personal experiences. However, finding people willing to talk to you might not be so straightforward.
In all likelihood, you can't pick up the phone and call a direct competitor in your area asking for advice on how to compete with them more effectively. Try reaching out to fellow professionals beyond your immediate surroundings if possible.
6. Make both ideal and not-so-ideal forecasts.
Take a two-pronged approach to forecasting — constructing one ideal forecast and one conservative one. For your ideal forecast, assume you're firing on all cylinders. Make a projection that assumes you'll be selling behind fully-realized, effective marketing efforts.
This one should also be created under the assumption that you're going to sell at high or multiple price points with a motivated, enthusiastic, capable team of salespeople.
Then, make your more conservative forecast — one where you assume you'll be selling without much marketing, at relatively low price-points, and virtually no sales staff.
Understand that neither of these projections will be totally accurate. In all likelihood, your real figures will wind up somewhere in between the two. Still, it's important to have some idea of your floor and ceiling when forecasting for a new venture.
Forecasting sales for a new venture can be a complicated process that often comes off as potentially unreliable. And in some cases, it might be. No forecast is ever perfect, but actively forecasting — no matter the maturity of your company — helps inform several other crucial aspects of your business operations.
So it always serves you to keep up with forecasting sales for a new venture.
Originally published Jun 15, 2020 8:00:00 AM, updated June 15 2020