Forecasting yet to come sales in your english language school business is a crucial element of setting up and running a business; it is an essential constituent of your english language school business plan. It’s implausible that your english language school business will be right but you must be able to make credible, evidence-based projections in order to map your english language school business strategy.
Your sales forecast is the financial projection of the quantity of turnover your english language school business will make from the sales of its products or services. Your sales forecast can stand alone, but it will be closely connected to your english language school business plan. It is an essential and fundamental piece of the planning method and it will be a major part of your profit and loss account and cash flow forecast.
So why do you need to forecast sales?
It is needed so you can
1. Predict your cash flow – your forecast might predict slow times of business where you may need a cash injection to pay for products or merely to pay the staff for example.
2. Manage Cash flow – fundamental to the success of your business, it is vital that you recognize how sales forecasting contributes to the calculation of the cash flow forecast.
3. Plan future resource requirements – for example, the number of personnel considered necessary to manage your orders and provide a certain level of service.
4. Plan marketing activities – this will observably have a knock on effect to the amount of sales you make as well.
Whatever the situation, it is essential that you research your estimated sales regularly and realistically, and take appropriate action to have another look at your strategy. Your sales forecast is the standard next to which you should frequently quantify what in point of fact happens in your business with regards to sales and the important thing is to be aware of the variances and why they arise, and to incorporate what you have learned into potential forecasts.
What elements do you need to think about?
It is by and large considered you should look to the next 3 years of your english language school business for your sales forecasts – the first year being detailed on a monthly basis
Things to think about
1. Is there an customary market for your product or service?
2. What is the magnitude of the market?
3. Is the market growing or declining, and if so,by what percentage each year?
4. What are the key factors that are currently influencing that market?
5. What may possibly affect it in future?
6. How do seasonal factors affect purchases of your product or service?
7. Are there trends in your business?
Do you know who your customers are?
1. How many customers will in point of fact pay money for your product or service?
2. Will they desert a different supplier to come to you?
3. How much will you charge?
4. Do you have the capital to provide the amount of products and services?
5. How many other businesses like yours are out there?
6. Your business will not be exclusive; what happens when new-fangled competitors come into the market once you have done the groundwork to raise market awareness?
The whole world is your marketplace with the creation of the internet – but what products/services can you sell In effect every business has some competitor(s) – how can you hoover up your competitors customers? How can you put a stop to your competitors taking your customers? Just how elastic with regard to pricing and the collection of products or services offered can you be?
Preparing your english language school business forecast
All english language school businesses need to base their forecasts on certain assumptions regarding potential changes that may take place in the future. These can be quantified and could include:
1. Sector expansion/decline by a certain percentage e.g. 5%.
2. Planned expansion in the number of workers to generate an expected 20% increase in production.
3. Better location – more customers – 30% increase in sales.
Preparing your forecast
You should prepare a sales forecast for each item you sell,and forecast:
1. By volume
2. By value
3. By a combination of both volume and value.
So what are the pitfalls when forecasting sales?
1. Make sure your forecast is based on confirmable,realistic and unbiased information.
2. Do not be tempted to overlook your examination if it showed bad results.
3. Do not make predictions solely on past performance. Keep examining at what else might impinge on your sales in the future and adjust your forecast as a result.
4. Understand what volume of goods you can produce. Is it physically possible to produce the amount of sales being forecast with the personnel, equipment and monetary resources available to you?
5. Does the pricing policy you have used in working out your sales forecast convey to what is really achievable?, or conversely, have the prices been set too low or too high so that either way your forecast is potentially unrealistic?
6. Is your business new?, your business may take longer than you imagine to get reputable, and have you set accordingly realistic sales targets?
7. Once initial sales have dropped off subsequent to your business launch, have you allowed for the increased marketing costs your business might incur?
8. Can you identify and justify the assumptions you have made in reaching the forecast, and explain them to interested parties if needed?