Finance : How to estimate your Sales? by Impulse
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Finance : How to estimate your Sales? by Impulse



How to estimate your Sales?

How to estimate your Sales?



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Finance : How to estimate your Sales? by Impulse Presentation Transcript

  • 1. Financial assumptions How to estimate your Sales? Catherine Blondiau Rodolphe d’Udekem d’Acoz Business and Finance Advisors @ IMPULSE.Brussels
  • 2. SALES Sales? What? Price? How Much? When? How? Market potential = (Average Purchase * How Much * How Often) 2
  • 3. What ? Focus on your Value Proposition What do you offer : MVP or full product/service, product alone or full package,… What is your Unique Selling Proposition?
  • 4. Price?  Pricing of alternative solutions  How much is the customer ready/willing to pay?  Price: - Not too low - Not too high - Coherent  Evolution of the selling prices?  What is the average amount per purchase? Test it!
  • 5. How Much?  2 methods to evaluate How Much you will be able to sell Top Down approach starts with market and industry data. Bottom Up approach starts with your customers and your resources
  • 6. How Much? – Top Down  A Top Down analysis is calculated by determining the total market, then estimating your share of that market.  It works in 3 steps : 1. Total Available Market (TAM) : How large is the market if all customers buy your product ? 2. Serviceable Available Market (SAM) : Focus on your own technology/services 3. Serviceable Obtainable Market (SOM) : Which realistic market share can be obtained by myself, considering competition, countries, my sales/distribution channels and other market influences?
  • 7. How Much? – Top Down : Example  You want to sell internet access in Europe TAM Total population of Europe 500 millions SAM % of the population who want internet access 80% 400 millions SOM Based on your market study, you expect to achieve 1% of that potentiel audience 1% 4 millions  Each account will yield €250 per year.  Expected revenue : € 1 billion (4 millions ×€250/customer)
  • 8. How Much? – Bottom-Up  This approach allow you to estimate the sales considering the client and your resources.  The idea is to understand how much you will be able to sell considering the resources of your company : - Time - People - Money
  • 9. How Much? – Bottom Up: Example  You want to sell internet access in Europe We can bring on board five salespeople 5 salespeople Each salesperson can make ten phone sales calls a day that get through to a prospect. 10 calls/day There are 240 working days per year. 240 days 5% of the sales calls will convert within six months 5% Estimated sales 600  Each account will yield €250 per year.  Expected revenue : € 150 000 (600×€250/customer)
  • 10. How Much?  Combine both approaches - Use top-down analysis to estimate the market opportunity for your company—to decide whether you want to try it in the first place - Use bottom-up analysis to get a realistic and testable estimate of what you can achieve within the first years of your startup  Challenge both approaches and present a coherent global perspective of your estimated sales  One-off/recurring/bundled sales?  What are the supporting trends of your market ?  How fast will the market grow?
  • 11. When & How ?  How and When are you going to sell your products ?  Sales channels: Direct / Indirect – focus may shift over time
  • 12. When & How ? - COCA  Impact on the cost of customer acquisition (COCA) Target Calls Meetings First sale €?
  • 13. When & How ? - COCA  Impact on the cost of customer acquisition (COCA) : - It costs money to achieve each sales - How much resources (time, €, HR) does it require (cf Bottom Up approach)? - Includes unsuccessful prospects - To be taken into account in your financial plan - Choice of channels :  Financially sustainable?
  • 14. When & How ? - COCA & LTVOAC  COCA & Life time value of an acquired customer - Cost of Customer Acquisition (COCA) COCA = Sales & Marketing Costs / Customers - Life time value of an acquired customer (LTVOAC) LTVOAC = revenue over life time x gross margin - Each acquired customer will provide you with revenues during his life time (as a client of your company) - Put those revenues in perspective with the COCA
  • 15. When & How ? - COCA & LTVOAC  Lifetime value of a gym member who spends €20 every month for 3 years? - €20 X 12 months X 3 years = €720 in total revenue (or €240 per year)  How much will it cost you to acquire this client? Allowable acquisition cost?  How to optimize LTVOAC?  Discount while managing CF
  • 16. Don’t Forget …  Probably one of the most important parameters … and certainly the most difficult to estimate !!  Consider different (sub)categories of products and/or services  Consider the volume of units (products/services) sold and the respective selling prices  Outputs – Per product (category) – Per client / market / segment – Per channel – Combine ?
  • 17. Don’t Forget …  Gross sales or Net sales (e.g. after commission, bad debts…)  Consider the initial volumes and the growth rates for each line of products/services without forgetting the market’s dynamic (seasonality, evolution of the selling prices, growth…)  Be aware of potential delays and lower (initial) volumes & growth rates than expected.  Consider the sales without VAT (unless you do not recuperate it !)
  • 18. Don’t Forget …  The sales data should be based on tangible elements and hypothesis directly linked to the business plan  In no circumstances should the volume of sales be based on the costs … : “ spontaneous sales creation ” in order to achieve break even or benefit on paper does not help and could possibly endanger your credibility in the eyes of third parties  To keep in mind: - User friendliness, avoid too much items - Internal logic : price, discount, cost of sales, payment conditions… & cycle
  • 19. IMPULSE Too many things to list them all here! We inform you, we guide you and we accompany you in a whole range of areas such as creating an enterprise, financing, innovation, town planning, environmental permits, partnerships … by means of newsletters, websites, seminars or tailored coaching. Briefly, we create a complete ecosystem in which you can grow as an entrepreneur! More info on our websites : - – – -