How do I make Sales Projections?
In an earlier post, I showed you how to figure out your personal living expenses, and how that translates into what profit you need from your business to cover it and your income tax as well.
I also said if your business profit does not meet you requirement for your living expenses, then you needed to spend less or sell more. Some of you thought that was a little unhelpful, so I am giving you a simple tool to help you develop a strategy to achieve the profit you need.
Anyway who has been to our courses knows that I bang on endlessly about this formula:
Sales less Business Expenses equals Profit
It is that simple, and that doesn’t change. However, in order to plan your profit strategy, you can employ junior cert maths and flip it on its head:
Profit plus Business Expenses equals Sales
And where does that get us? Well, it is the start to helping us to figure out a sales figure that will generate the profits that after tax will support the lifestyle to which we want to become accustomed.
What you need to know before using the tool is:
- The profit you need to make on a weekly basis to support your lifestyle. (Hint: 1000 profit per week gives a single self employed person around 3000 per month into their hand)
- The number of days per week you want to work.
- The number of weeks per year you want to work. (Hint: PAYE people work a max of 46 weeks in the year.)
- A ballpark price per sales unit you want to charge. For example, for a service business, it might be an hourly or daily rate. You will have to opportunity to mess with this using the tool.
- A ballpark idea of expenses you might incur. Advertising, Training, Accountancy fees, other.
And now the tool:
The formulas are in the black areas, so just type into the blue areas and you will get how many sales units you need to achieve per day that you are willing to work in order to support your lifestyle. Couldn’t be easier, right?
So give it a go, and you will be one step closer to financial control!
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