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I was watching a UK bbc tv program called ' The Dragon's Den'. Its where entreprenurs or people with businesses or ideas approach rich investors (the dragon's) to help them with improving the business further. In it the main question always asked is, what is the projected future sales of the venture and what is the profit or loss of that.

My Question is, how can anyone know what the future sales will or would be and thus what the profit will be etc?

Thanks x

2007-11-05 09:20:08 · 2 answers · asked by Anonymous in Business & Finance Small Business

2 answers

You can't 'know' you can only 'project' (i.e. guess)

What they are trying to do is discover if the people asking for money have done their 'homework' .. this consists of

1) Market Research .. what market (how many customers) exist for this type of product and what percentage of that market will this new product reach and gain ..

Example - Household product - their are 30 million homes and 1% will buy my new product per year so this is 300,000 sales per year or 25,000 per month. We estimate it will take 3 years to reach this target with 100,000 sales in year 1, 200,000 in yr. 2, (12,000 per month by year 1 end, 20,000 per month after 18 months ..)

2) Manufacturing costs and Sales Pricing - what will it cost to make, ship and deliver to Customers and how munch will they pay for it ..

Example .. similar products sell for £2.99 to £3.49 .. our superior product has ex-China factory costs of 49p, landed cost UK is £1, all other costs (including retail mark-up) is £1, end sell price is £2.49, profit 49p.

3) Projected accounts -

Example :-
One-off set-up costs (yr 1) - cost of patents and cost of setting-up manufacturing Contracts with factory in China = £50,000

End year 1, profit on 100,000 sales at 49p = £49,000 less cost of set-up £50,000 = loss £1,000

End yr. 2, profit on sales of 200,000 = £98,000 less £1,000 loss last yr = profit end yr £97,000

End yr, 3, profit on slaes of 300,000 = £147,000

.. and so one

2007-11-05 19:03:10 · answer #1 · answered by Steve B 7 · 1 0

There is no way of knowing exactly what the future sales etc will be, but by using reasonable assumptions supported by research a good estimate can be established.

The important part is to have thought about all the costs. Many entrepreneurs often don't think about obvious things like office or warehouse rents or even staff wages (especially employers NI contributions). They often miss less obvious things like insurance and stationery.

If you're putting together a business plan together the most important thing when looking at the numbers is to consider a worst case scenario - you may think your product is brilliant but if the public don't like it (or the existing alternative is cheaper) you'll be dead in the water before you start.

2007-11-05 22:07:58 · answer #2 · answered by Bob H 3 · 0 0

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