EntrepreneurshipReview - EOU & Sales Forecasting

EOUFixed Expense - an expense that isn’t affected by the number of items of business produces

ex: rent,Internet access, salaries and utilities*ongoing expenses a business must pay to be able

to operate

I SAID U ROXInsurance, salaries, advertising, interest, depreciation, utilities, rent, other fixed expenses

*fixed doesn’t mean the expense will never change - means only that an expense doesn’t change in response to sales

EOUVariable Expenses - changes based on the amount of product or service a business sells

Cost of Goods Sold (COGS): cost of materials and labor to make the product or provide the service

Other Variable Expense: expenses as commissions for salespeople, shipping and handling charges

Sales Forecasting TechniquesThere are many methods for estimating sales

More than one technique is used to help

Common Forecasting TechniquesFull Capacity

Observational DataIndustry Standard

Industry/Seasonal CyclesMarket Share

Proportional Scaling

Sales Forecasting TechniquesFull Capacity - simple, you forecast selling as many products as you can

Ex: candles

Observational Data - observation of competitors’ customersEx: restaurant

Industry Standards - proper sales forecast you will need to know how sales are estimated in your industry

Ex: Retail store

Income StatementIncome Statement - a financial statement that measures a company’s financial performance over a specific accounting period

● gives a summary of how a business incurs its revenues and expenses through variable and fixed expenses

● Shows net profit and net loss - profit or loss after taxes “net”

Income Statement

Sales Forecasting Techniques Industry/Seasonal Cycles - sales cycles, particular buying phases that apply to your industry.

Ex: Florist

Market Share - when your goods are sold via Internet or catalog# of customers x # of purchases per year x average amount of each

purchase

Proportional Scaling - estimate the quantity you think you are going to sell within 6 monthsSales per day by the # of days in the monthGradually scale up or down your sales for months 7 through 12

May 11, 2015Please complete…..1. Sales Forecast - Turn in - edit BP2. Fixed Expenses - Edit BP3. Income Statement - Turn in - edit BP