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Profit and Sales Projections
PAGE 3
Create-Your-Research Scenarios
To get these numbers, you can market test your idea. Put up the machine for a week and count the number
of people. Or in other words, use a prototype to gain market information. This can be extremely helpful
with ideas that are truly new.
I once had a client who presented what we call a “unique marketing proposition”. Others call
them bafflers. The product was Chinese ice cream. No, not ice cream made in China, but ice cream made
the American way, with flavors indigenous to China. The flavors ranged from the sublime Mandarin Orange
to the exotic Xeiping Lime Chocolate. Would the public accept it? Our market test was to crank out
a batch, do a test in front of a local grocery super store, and videotape the event. In four hours, the
customers ate 86 gallons of ice cream one sample cone at a time! The next day, the purchasing agent sent
a whopping PO via fax. The short version is if you can’t find it through research, create it through
research.
Or, you can participate in the age-old method of many names. Some call it WAG ( Wild A** Guess) or RWAG (Really Wild A** Guess); I call it a bunch of hog wash! But whatever it’s called, you must by the nature of the process make an assumption. And this is how you do that.
What-Iffing Your Numbers
Take the plunge! With a complete set of projections in a spreadsheet, you can do the “what if”
analysis that all us professionals use to complete a business plan for pay. In this case, the “what
if” is a sales number – actually a volume number. Volume in the case means the incident of sale
or transaction. Your volume number, in your spreadsheet, reflects through the other pages, i.e., if you
change the number of sales from 10 to 100 – through your spreadsheet the total sales in dollar changes
as well. Using spreadsheets effectively is another book for sure. Fortunately, most come with good “help”
sections and doing macros and formulas isn’t very difficult.
What this simple example does, hopefully, is show you how to begin with the universe and cull down until
you make but one assumption – how many of those people walking past my gumball machine at Hollywood
and Vine will buy?
Now JT – sit down for this one – you could have nuclear physicists, CPAs, geniuses, savants,
and kings help you and they'd have as much chance as your local bartender or barber of coming up with
an accurate sales projection. Projections are never accurate. They can’t be. They never will be.
Unless through pure happenstance reality matches. continued
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