IntroductionIn very new business venture, it is important first to consider its viability in order to ensure realization of profits. Generally, the initial market research is largely based on data obtained from existing competitors within the industry. Such data facilitates in making estimates of how the industry is performing as well making enabling a new entrant into the industry to make sales projections. This aids management of an organization to keep focus of the future objectively by analyzing current and past information. Precise sales forecasting enhances cash flow, facilitates having in-depth knowledge of both the products and the customers, and facilitates proper planning of the capacity and in determining the anticipated return on investment.
Therefore, the main aim of this paper is to take a closer look at the factors to consider in venturing into retailing industry for instance a supermarket. Sales ForecastingIn forecasting sales, it is important for the company to sufficiently organize and analyze data in a manner that would facilitate precise estimations. Besides, one of the key considerations that would facilitate proper sales forecasting is the source of information with respect to economic standards of a place as well as level of consumption (demand) across the demographic profile.
In this regard, a few sources of information that would aid in sales forecasting are among others, like-businesses and/or competitors, trade supplies, associations, publications and directories. For a new business venture, sales forecasting would generally entail a few basic steps. First step would involve developing a customer profile based on economic and demographic data available. This should come in handy at determining the industrial trends. Although such data would be available from trade publications or directories, assumptions with respect to characteristics of the market have to be made.
For instance, it is generally argued that 80% percent of sales results from 20% of a business’s clientele base. Being able to identify a sizeable percentage of potential customers would thus aid in developing the profile of the target market. A possible method is to categorize the potential customers in terms of their buying propensity with respect to age –this would be aided by carrying out a customer survey. This is illustrated in the table below. Figure 1: Propensity to Buy in relation to various Age Group Source: Bassin, WM 1993, ‘Using demographic data to drive business forecasts and profit plans’, The Journal of Business Forecasting Methods & Systems, vol.
12, no. 1, pp. 19-21In this forecast, the major assumption is that demand is largely influenced by the area’s demographic profile. Besides, it is evident that selling one or more units of the company’s products is influenced by the age group. Some of the products which are influenced by demographic makeup are for instance confectionary, recreational equipment, clothes and entertainment equipment.
Assuming that the demographic profile influences sales to large extent would entail preparing forecast of Population of Buyers (the number of customers in millions) ‘who buys at least one unit of the product’ per annum) (Bassin, 1993). Afterwards this would facilitate preparation of sales forecast by making use of population of buyers as well as other information. A projecting ‘equation for the Population of Buyers (POP) is’ for instance: