Financial Projecions for a Start-Up

Creating financial projections is part art and part science.   First, accuracy is a relative term.  Nobody would reasonably expect you to forecast sales exactly as they will occur in the future.  What is important is coming up with a reasonable range of sales based on 1) your market research of the level of potential demand and 2) your ability to produce or deliver products or services to the client. 
 
Lets say that your retail store is a maternity clothing store.  From your market research you learned that there are 2000 births in your market each year.  Also you believe that about 70% of these people will shop at your store due to lack of competition in your niche.  Based on your product pricing you believe that each sale will average $100.00. 
 
From a survey you did with your relatives and friends you found that the average client will spend $500 total on maternity clothing and you believe you can capture about 70% of those dollars conservatively. 
Using the above numbers your projected sales would be:
 
$100 X 1400 clients X 3 shopping trips = $420,000
 
and/or
 
$350 capture (of the $500 average) X 1400 client = $490,000
 
so your projection should reflect a sales potential of $420K-$490K annually.
Obviously you would not just take that number and divide it by twelve.  I would start out at 50%-60% of your projected sales and grow them over the first 12-18 months.
 
Also, you have to be able to deliver that level of sales so obviously you would need the appropriate number of square footage, employees, etc to deliver $450,000 in sales. 
 
Good Luck
 
Mr. BizPlan
www.DIYBizPlan.com

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