Sales estimates as first part of budget

1. Sales estimates as first part of budget • Having completed the gross margin calculations, we can proceed to estimating the sales volume as a part of the first budget for 4-5 years. • This budget will tell us ultimately the profitability of the venture, based on the current guesses we are able to make LMKmethode Step 3 Sales estimates

2. Market estimates and marked share • We now go back to the previous A4-sheet and make an estimate of the population reachable that would respond to our promise, setting this up in the first rows of our Budget spreadsheet. • For our example with the X-product we select to use a time horizon of 5 years • We are planning to use sales channels, so we must consider the end-user-price consistent with the corresponding mark-ups to cover the resellers, distibutors (and for export, the importers margin) LMKmethode Step 3 Sales estimates

3. Market and Sales Estimates • 3 Stage guessing: total, reachable, convinced LMKmethode Step 3 Sales estimates

4. Market figures 1 • A We have thought of a product for comsumers that is small in relation to the total population of the geographical area, but increasing at a rate of aprox 20% per year. For a good business plan, these figures should be verified with data from Statistisk Sentralbyrå or others. • B How shall we reach the potential customers with our promise? Here we have thought of for the first two years to advertize in the spesial- interest magazine that is read by our target group, if such a magazine exists. For the next years, where we have estimated an exceptional high degree of productX knowledge, more massive advertizing will have to budgeted for • C With knowledge of our product, only a fraction will buy in one year.Here are very optimistic figures, needing a very good invention! LMKmethode Step 3 Sales estimates

5. Market figures 2 • We have not shown any implications of the market beeing saturated. For the calculations to be valid, the A-figures should be “fresh” potential customers, not having bout the productX nor a competing product. Otherwise we have to make the spreadsheet take account of the number per year that drops out of the potential customer list due to their having bought the productX or a competing one. • We have not filled in market and sales estimates for other markets that would be natural to consider. The three additional markets suggested here sees natural if the users manual for the productX is written in English in addition to “Scandinavisk” (Norwegian can probably be used in the other Scandinavian countries.? (Depending on the nature of the product and the user groups level of education)) • Internet sales must also be added. (Localization of productX needed?) LMKmethode Step 3 Sales estimates

6. Summing up market and sales estimates • The process of guessing these figures are quite provoking. • Our product price is close to 6 times the manufacturing cost to make possible an extended sales sales structure with importers, distributors and resellers. (Old-economy structure) • We have not yet estimated sales for export markets If not OK-start again LMKmethode Step 3 Sales estimates