Business planning expert Tim Berry explains how to forecast sales for a new product or service that you don t already have data for. Duration: 3:00
Question today: How do I forecast a new product? How would I know? What you want to start with is breaking this new product down into factors you can get a hold of. I have two quick examples. The first is the restaurant. Even though you have no past data on it, you have so many tables, chairs, hours that are open. You have peak hours and slow hours, and if you start to think about how many meals per table that are peak hour, how many drinks per meal, what's the average price of a meal, what's the average price of a drink? You have to deal with some estimates and averages obviously.
Then you go through peak hours in a week and slow hours in a week and how many weeks in a month and build a forecast that's based on a collection of assumptions so that it's easier to pull apart, explain, revise later, and understand. A second example is the website. How do I forecast what I'm going to sell over a website that I haven't even built yet? You're going to start by estimating traffic and that will have to do with whether you have any hope of search engine placement because of keywords or are you going to buy traffic by paying for clicks and search engine terms, and if so, how many clicks do you get? How many clicks will produce traffic on the website? Of those who are on the website, what percentage will actually convert into buyers?
Thereto, you have factors that you can look at later so that you can tell when you're off because all forecasts are wrong. You realize that. It's a matter of then looking at how is it wrong, in what direction, and what do I do to manage my business as a result of that? Of course, over time, your forecasts get better. Also, remember that you're forecasting something that you know nothing about, that brand new product, only the first month. By the second month, now you have some data and your assumptions get better. And by the third month and by the fourth month.
A business plan isn't about being right, guessing what's going to happen 12 months from now. A business plan is about setting guesses down as assumptions so you can track later how the real results differ and then revise and make course corrections. So I hope that helps. I'm Tim Berry and thank you.
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