Ready to put together some sensible sales projections and have a fantastic year? It won’t be easy and it will take work. But if you circle through this five step process throughout the year, you can hit those bigger sales numbers!
For many small businesses, figuring out sales projections for the coming year can be a lot of numbers and guesswork. The more guesswork, the greater the margin of error. The greater the margin of error, the greater the chance the business won’t hit the numbers. That creates other problems as well. Don’t let this happen to your business.
When a business follows a fiscal calendar year, business owners spend time early January reviewing last year’s numbers and finalizing the budget for 2020. It begins with rolling over numbers from 2019, making some sales predictions and adding in anticipated expenses.
The difficult side of budgeting for a small business in the early years is revenue. If it’s your first year in business, you may not have any sales history. Some businesses disregard sales history and fall into a bad habit of projecting revenue based on expenses. Sales revenue should be based on the market and your ability to capture a percent of the pie. This article is about helping you zero in on realistic sales projections for 2020 that will lead to profitability and growth. Read on to learn the five simple steps you can take to reduce the guesswork and margin for error.
If you use a lot of guesswork, you are not alone. Many business owners guess at their monthly sales numbers. When I worked in media, I was curious as to how the sales manager determined my quota. There was never an explanation; I was just handed a bigger number. I made it my responsibility to review any sales history, determine repeat business for the coming month and prospect for new customers. I knew I had to write a certain amount of proposals and have enough business in the sales pipeline, in order to book enough business to make my quota. Once I adopted a process and executed my strategy, I never had anxiety about the numbers. I made a sales plan and then worked the plan. To increase sales in your business, you need to have a plan and then commit to working the plan.
Here is a simple five step circular plan you can follow to build sales and grow your company. Included are some examples of how a business might approach calculating their sales growth. These examples may give you an idea but there are lots of ways unique to every business that are good strategies for sales growth.
Make sensible sales projections
Create a spreadsheet for playing some “What if’s” with your 2020 sales projections. Depending on your business, you may work with just monthly sales totals or break sales numbers down further by department or product/service lines. Use 2019 numbers as your base line.
Sample spreadsheet
Determine your strategy for increasing sales – increase the number of customers, increase the average sales amount, add a new product line or a combination of strategies.
In any business, a helpful metric to know is the average dollar amount of a sale. This can be used as a key performance indicator for comparing future sales. For example, if you have a retail store that averages $20 per sale from 100 transactions per month, your goal may be to increase your average sales amount by 10% to $22. With increased marketing efforts, you also plan to increase the number of customers each month by 10%. If successful, monthly income would increase by $400 +/- or approximately $4800 annually.
Gather market data about reported sales and what’s predicted in your industry. Pay attention to trends that affect your industry. Look at past sales history and play with the numbers to begin creating sales goals for 2020. I recommend a 2020 sales column for each month next to the 2019 actuals. Always footnote any explanations for how you arrived at certain numbers. You won’t be confused when you look at things a month from now. If you have some idea as to how big your sales can grow this year, the next step is to define the sales opportunities and strategies behind each number.
Start with a calendar
Take a 12 month calendar and pencil in the promotions and sales you had last year. Highlight additional calendar periods that offer sales opportunities for your business. For example, if you are a retail store that carries a unique jewelry line, Valentine’s Day may be an opportunity to target gift buyers and bring new customers into the store. Don’t worry about the how, just highlight opportunities throughout the year. Now compare the highlighted opportunities with what you did last year. How will these opportunities affect sales in 2020? For example, if you didn’t promote jewelry last year and you plan to this year, your sales projections need to reflect your expected results. On your spreadsheet, add a revenue line for each promotion throughout the year and the estimated monthly sales volume.
Identify offerings and promotions
Once the calendar has been marked off with sales periods, the next thing is to further define the specific offering or promotion. Don’t just consider your own ideas, ask your employees, listen to customer feedback, ask your vendors what businesses are doing in other markets, and watch your competition. If you buy inventory seasonally from local vendors, specialty trade shows etc you may not have enough information to outline special promotions for every month. Focus three to six months out. Identify the sales promotions or offering and figure out pricing. Ask yourself key questions such as: will this promotion appeal to new customers? Will this new product line help to increase my average unit of sale? How many sales should I anticipate? With the answers to key questions, circle back to your sales estimates and use what you know about specific offerings and promotions to firm up your projections. Review the numbers and make any adjustments.
In addition to perhaps a featured product, a small business may consider having a special event to attract potential customers. This event could be as simple as extended hours with light refreshments. Or perhaps you run a free gift wrapping promotion for Valentine’s Day. You can also consider pricing strategies such as bundling items or quantity discounts. What ever you decide, remember to circle back to your projections and make any adjustments based on your ideas.
Have a marketing plan
Once you have identified periods on your calendar for special promotions, begin to formulate a marketing plan. Outline what tools i.e. facebook, email, or TV, you will use to promote your offerings or event. No need to plan as far as specific posts and content, just outline the general plan in order to give you a view of the big picture.
Also, take an active role in attracting new customers. Consider creating FB posts focused on a sales offering specific to first time customers that can be dropped in weekly. Think of a way to collaborate with another local business and cross promote each other’s products. Or maybe you have an idea that would be a human interest story? If so, write a feature article and submit to the local news channels.
Circle back and make sure that your inventory offerings, your pricing, your promotions, special events or whatever you are planning comes together with your marketing and projected sales numbers. Taking all this into consideration, further adjust your sales projections.
Circle back
Once you are comfortable with your sales plan and sales projections, record these numbers into your 2020 budget. Continue to use your sales projection spreadsheet and revise month by month. Pay close attention to “mile” markers, i.e. quarterly totals and of course the annual total.
I have a friend whose business is heavily dependent on holidays. How does this affect sales projections? Consider for example, the Easter holiday may occur in March or as late as mid April. If Easter occurs in April, this will cause March sales to be down and April sales to be way up. The next year it could be the opposite and at first glance, it will look like sales are way off. Instead of looking at sales monthly, it may be important to your business to track a specific selling or seasonal time period.
Make sure to get in the habit of circling back to make adjustments to your sales projections as time passes or circumstances change. Maybe you counted on a special promotional price from your supplier and it didn’t come through. Go back and make adjustments.
Create the habit of jotting down what your direct competitors are doing and how they are pricing their product. Make some notes on your calendar. Include enough details that will be helpful when planning your next promotion or next year’s sales.
If you follow these five simple steps and circle back often, you will have a good plan to increase sales and grow your business. It will take the guesswork out of your sales numbers and will help you stay on track and increasing sales!
Making sense of it all
Here is a summary of the five simple steps to grow your sales this year
Make sensible sales projections
Start with 2019 actual monthly sales. Make projections for 2020 taking into account product pricing, inventory, promotion, number of customers and other relevant factors. Document your reasoning.
Highlight your calendar
Review the 2020 calendar and highlight periods for promotional opportunity. If you are in retail, consider promoting special occasions and seasonal specials. If you are in a service business, look for any correlation between the time of year and products you offer. For example, if you are a carpet cleaner, promote a special price to entice people to book before the holiday rush.
Identify offerings and promotions
Figure out specific product offerings, pricing, promotion or other strategies that will be implemented to drive sales during the calendar periods.
Have a marketing plan
Begin to map out a monthly marketing plan with just enough detail to give you the big picture view. Make sure it is reasonable and allows enough time between promotions.
Circle back
Your sales projection spreadsheet tells the story. Always circle back after each step and reevaluate your projections. Make changes as needed. Each month post actual sales totals to your projected. Compare and jot down what you learned.
If you have one take away from this article, don’t just estimate your sales numbers. Create a plan for targeted growth. Good luck and have an awesome sales year!
Sales is an area of expertise. Email me, Barb Weber, if you have questions or just need some guidance on your 2020 sales projections.