Free Financial Management Books

Free Book: How to Forecast Your Revenue and Sales

 

How to Forecast Your Revenue and Sales

A Step by Step Guide to Revenue and Sales Forecasting in a Small Business

How to Forecast Your Revenue and Sales This guide will walk you step by step through all the essential phases of Revenue and Sales Forecasting in a Small Business.
Forecasting, particularly on a short-term basis (one year to three years), is essential to planning for business success. This process, estimating future business performance based on the actual results from prior periods, enables the business owner/manager to modify the operation of the business on a timely basis. This allows the business to avoid losses or major financial problems should some future results from operations not conform with reasonable expectations.

Forecasts - or Pro Forma Income Statements and Cash Flow Statements as they are usually called - also provide the most persuasive management tools to apply for loans or attract investor money. As a business expands, there will inevitably be a need for more money than can be internally generated from profits.

Table of Contents

1. Introduction
2. Facts Affecting Pro Forma Statements
3. The Pro Forma Income Statement
4. Comparison with Actual Monthly Performance
5. Break-Even Analysis
Bonus Guide
6. Essentials of Financial Planning

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Sample Content

Sometimes the only way a company can expand sales is by introducing a new product. The current products have reached their sales peak. Moreover, they cannot be modified to generate additional sales.
It becomes a question of where to look for a new product that can be made and sold at a profit. This guide speaks to that question. It discusses a practical approach to the selection of a suitable new product and suggests sources that can be helpful to finding such a product.
A systematic approach is the best way to find a new product. In such an approach, your first action should be to set a new product policy. Before you start to search for new product, set guidelines for that search.
These guidelines should help to provide answers to questions, such as: Can the new product be made on present equipment? Will it be sold to your present market? What is the profit potential of the new product?
The second major action involves responsibility for finding a new product. Will you personally handle the project? Or will you delegate it? Either way, the person who looks for the new product should have a clear understanding of the resources available for this project. In addition, he/she should be authorized to make decisions for your company.

Defining a New Product for Your Company
Although there are thousands of products available on a reasonable basis to any company that will manufacture and market them, the question is: Which ones can be made at a profit?  In fact, so many exist and are being generated, it would consume all the resources of a small company to examine each one of them only briefly. On the other hand, too brief a search or a hasty decision can result in costly mistakes, if not outright disaster. It is thus imperative to define the product you are seeking.

Your task is to get on paper some facts about the kind of new product you want to produce in your factory. These facts consist of your requirements in general terms which will be applicable to the new product. The following questions, though not all inclusive, should stimulate your thinking in defining a product or establishing criteria by which you can judge potential products. When you have set such criteria, you can write a "profile of product interest."

Discovering Your Company's Strengths
1. Is manufacturing your company's strength?
2. Do you prefer a highly automated production line?
3. Do you prefer a product with a high ratio of labor to production costs?
4. Are your production personnel highly skilled?
5. Are your industrial product designers exceptionally skilled?
6. Does your present equipment have a long usable life?
7. Is your present equipment largely under utilized?
8. Do you have a strong sales force?
9. Is your sales force hampered by too narrow a product?
10. Do you have strong capability in a particular technology?
11. Does your company have cash or credit resources not used in your present operation?
12. Does your company have a reputation for high quality products?
13. Does your company have a reputation for low cost production?

Deciding on the Market Preference
14. Do you prefer a particular industry?
15. Do you prefer a product sold to retail consumers?
16. Do you prefer a product sold to industrial users?
17. Do you prefer a product sold to the government?
18. Do you prefer a product with long usage?
19. Will you accept a product that may be a fad item?
20. Do you prefer a consumable item?
21. Is there a distribution system (trade practice) you prefer?
22. Would you consider a product limited to a given locality? (Or a product in demand largely in overseas markets?)
23. Is a product that requires specialty selling desirable?
24. Is a product that needs mass merchandising suitable?
25. Do you intend overseas distribution?
26. Must your present sales department be able to sell a new product?
27. Are you willing to create a new or separate marketing department to sell a new product?

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