If you have ever seen Shark Tank, you are well aware that the most commonly asked question is “What are you projecting your sales to be?” Almost always, the Entrepreneur responds with a number that seems astronomical, and you are left wondering where they possibly came up with that. However, this number is precisely calculated, using past numbers and potential growth factors. There are several factors that play into how to accurately project sales figures, and at Brass Financial Group, we are here to help you the best we can with your projections.
1. Categorize All Income and Expenses
The best way to be able to see how the future might shake out is to study your past. Study ALL of your monthly expenses and income streams, while also categorizing them to be able to clearly see what would happen if you lost one source of income. For example, what would happen to your overall sales if your biggest client went elsewhere? What would your future profits look like if you gained two more large clients? All of these questions are easily answered when you can get an organized look at all of your financials.
2. Figure out your Debt
Once you have figured out your estimated income, expenses, and cash flow for your business, you can begin to think about your debt. For example, if you are carrying a high balance on your credit card, then you can factor in future interest into your expenses. However, this is only something you can begin to project once you know about your cash flow. If you have a low cash flow, you will have high debt, leading to higher interest and in general, greater expenses to pay for. If you are projecting a high cash flow in the future, you can pay down your bills and focus on other things, since you do not have to worry about interest payments. Figuring out how to project and manage debt is a crucial component of determining the value of your business down the road.
3. Figure Out Seasonality
Whether you realize it or not, every business has seasonal peaks. Typically, when we think of seasonal businesses, we think of beach towns and ski resorts, however almost every business in the world has seasonal peaks. It is important to look back at past sales records to loom for peaks and patterns. By recognizing these, you can forecast them in the future, helping to make your predictions more accurate.