for business plan purposes how did you estimate your sales when starting up? I’ve seen loads of books and articles that deal with this for already operating business that has sales and cash flow but none really deal with a from scratch startup.
What I’m looking for is what factors did you use to come up with a reasonable guess.
I think the more relevant question would be “how would we do it today” rather than how did we do it when we were in the same situation you are in.
I would start by trying to figure out what the competition is doing. For delivery, watch them and count deliveries. If sit-down, count tables and turn rate (go to dinner on different nights and take your time). Make some assumptions about average tickets and extrapolate.
I would ask food purveyors how much cheese or flour they would expect to sell to an account like you are proposing and build some assumptions based on product mix and average ticket.
I would go to the city and research the pattern of sale tax receipts for restaurants and mirror that pattern in my month by monthy forecast for the year.
I would take the market rate for leases and multiply the annual rent for competitor’s restaurants by 10 or 12. (If annual rent in your area averages $20 per foot and a competitor has 1500 square feet, I would enter a number of 300-350K in sales (($20X1500)X10=$300,000) and so on) This is NOT valid for any one competitor, but suprisingly accurate for a group of competitors. This might give you “check for reasonablness” on your forecasts (not to mention viability)
Of course, marketing drives business. You will need to make assumptions about marketing before you make assumptions about sales. I would forecast very different numbers for a new store planning to spend 30K in the first year than one planning to spend 10K.
bodegahwy thank you for your insights, you’ve given me a few more directions to go. I’ve been spying on the compeition for some time espeically a couple of new entrants, while not direct competitors, have introduced some intresting pizza choices that I’m trying to guage the response to. I’ve found the annual sales tax reciepts but nothing that gave me a monthly break down, I’ll need to make some phone calls to find out the city can give me a break down, I had been averaging it out but the actual month to month would give me a better idea of the spikes and dips.
On the assumptions about average tickets…would you recommend averaging their entire menu or just their high and low items in each menu category ignoring everything in between? Both ways have been recommended on other forums I visit but my gut says the entire menu average would be better.
again thank you for the input.
Averaging menu items is not going to get you an average ticket. For example in my delco, the average ticket is about twice the price of an average pizza. We are pretty good at add on sales.
You might place some orders and ask the driver or casually ask at the front counter… or what the heck, take a part time job at a place for a few months. (Don’t do it at the ones closest to where you will be though, it creates bad feelings)