Navigation bar
  Home Print document Start Previous page
 69 of 71 
Next page End 64 65 66 67 68 69 70 71  

© Copyright 2002-2003. All rights reserved.
Page 69
How To Investigate Any Business Opportunity
market factors make themselves felt.
Sales Forecast vs. Sales Potential
A distinction is necessary here between making a sales forecast and estimating sales potential. A sales
forecast is based on past sales performance and a reckoning of known and anticipated market condi-
tions.
From these, the expected sales level is determined.
Sales potential, on the other hand, is a measure of the capacity of the business to reach a certain volume
of sales. It is based on knowledge of the total market and the extent of competitive influence, and it in-
volves the use of strategy through sales effort. 
Past sales performance may bear little or no resemblance to sales potential. In general, sales potential is
likely to represent a higher sales level than a sales forecast.
Length of the Forecast
For the purposes of a buy-sell transaction, a short-term or at most an intermediate-term forecast is all
that should be attempted. Short-term forecasts cover a few months - seldom more than a year. Interme-
diate-term forecasts should be limited to 1 or 2 years.
The Information Needed
Since the forecast is based on past sales of the company, it is necessary to know the dollar sales volume
of the firm for the past several years. If not enough sales data have been recorded, it may be necessary
to improvise.
In one instance, the prospective buyer of a self-service laundry was unable to get sales figures. He con-
tacted the manufacturer of the washing machines to determine the amount of water used per machine
load. 
He then learned from the water company the amount of water consumed by the business. Using these
two figures and making allowances for water used for drinking, rest room, and so on, he computed the
number of loads washed per month. This figure multiplied by the price charged per load gave him a rea-
sonably accurate figure for the sales volume.
Short-Term Sales Forecasting
For a short-term forecast, it is usually enough to know the sales for the past few weeks or months in
comparison with the corresponding period of the year before. If sales for the past 4 weeks were 8 percent
more than the corresponding 4 weeks of the preceding year, sales for the next few weeks can reasona-
bly be expected to be 8 percent ahead of the corresponding period a year ago.
Previous page Top Next page