New year, new challenges! It’s time to start forecasting sales for your San Francisco, CA business! There is no doubt that 2020 offered many ups and downs, and now you might have more hope for stability and prosperity. But creating budgets, planning goals and staying solvent are challenging unless you make good sales forecasts. To get you started, here are five financial forecasting tips to help you plan for 2021:
- Know the “why”: Why do you need sales forecasts? This question frames the areas to focus on in your projections. Newer businesses need different forecasts than established ones. If you run a startup, you likely need to set realistic expectations and goals so you can move toward profitability. For an established business, you may need to consider challenges brought by the pandemic and change your approach. No matter your position, the sales forecast helps you create profit and loss statements, cash flow predictions and budgets.
- Set goals: A startup may merely want to survive, while more established businesses set profit goals. These goals are easier to establish if you have a sales forecast. Decide what you hope to achieve in the next month, each quarter or by this time next year. Calculate the sales needed to make this happen. You will know whether your goals are realistic or if you need to reassess your practices.
- Do not forget about marketing: Marketing, especially online marketing, is essential to sales goals. Large website, email and social media campaigns cost more than making a weekly Facebook post and hoping people see it. However, greater efforts also bring in more sales and cash, even if they cost more. When you start your sales forecast, look into how much you are willing to spend on marketing and how that will pay off. If you plan an aggressive campaign so your business can expand, expect to break even and not necessarily be profitable. Sometimes, marketing efforts take longer to show their results.
- Decide on details: The details in a marketing forecast vary depending on your business needs. General forecasts that combine all products and services marketed by your company are nearly useless. They don’t show product popularity and whether you need to expand or wind down your offerings. Start by setting categories. For example, if you run a restaurant, do not create a forecast based on each food item you offer. Instead, divide it up into lunch, dinner and happy hour.
- Forecast on units, not dollars: For most businesses, forecasting on units is easier than dollars. First, you need to define a unit. An hour of consulting, one coat or one lunch are all units. When you focus this way, you see the number of products you sell, rather than just a dollar amount. That approach better assesses your marketability. Once you determine units, you can translate them to money.
Medina & Company Consulting, Inc. offers business asset valuations in San Francisco, CA. These services also include forecasting sales for your business to secure a right direction in 2021. Schedule a consultation today to receive financial forecasting tips and other accounting services.