Estimation Market Potential
A small business can be successful only if sufficient market demand exists for its product or service. A sales forecast is the typical indicator of market adequacy, so it is particularly important to complete this assessment prior to writing the marketing plan. An entrepreneur who enters the marketplace without a forecast is much like an enthusiastic swimmer who leaves the diving board without checking the depth of the water---and the results can be nearly as painful! Many types of information from numerous sources are required to gauge market potential. This section discusses these information needs as it examines the forecasting process.
The Sales Forecast
Formally define, a sales forecast is an estimate of how much of a product or service can be sold within a given market in a defined time period. The forecast can be stated in terms of dollars and/or units.
Because a sales forecast revolves around a specific target market, that market should be defined as precisely as possible. The market description forms the forecasting boundary. If the market for desks is described as “all offices,” the sales forecast will be extremely large. A more precise definition, such as “government agencies seeking solid wood desks priced between $800 and $1200,” will result in a much smaller but possibly more useful forecast.
One sales forecast may cover a period of time that is a year or less, while another may extend over several years. Both short-term and long-term forecasts are needed for a well constructed business plan.
A sales forecast is an essential component of the business plan because it is critical to assessing the feasibility of a new venture. If the market is insufficient, the business is destined for failure. A sales forecast is also useful in other areas of business planning. Production schedules, inventory, and personnel decisions all start with a sales forecast. Obviously, a forecast can never be perfect, and entrepreneurs should remember that a forecast can be wrong in either direction---either underestimating potential sales or overestimating potential sales.
Limitations to Forecasting
For a number of practical reasons, forecasting is used less frequently by small firms than by large firms. First, for any new business, forecasting circumstances are unique. Entrepreneurial inexperience, coupled with a new idea, represents the most difficult forecasting situation, as illustrated in Exhibit 7.7. An ongoing business that requires only an updated forecast for its existing product is in the most favorable forecasting position.
Second, a small business manager may be unfamiliar with methods of quantitative analysis. Not all forecasting must be quantitatively oriented---qualitative forecasting is often helpful and may be sufficient---but quantitative methods have repeatedly proven their value in forecasting.
Third, the typical small business entrepreneur and his or team know little about the forecasting process. To overcome this deficiency, the owners of some small firms attempt to keep in touch with industry trends through contacts with appropriate trade associations.
Exhibit 7.7 Dimensions of Forecasting Difficulty
The professional members of a trade association are frequently better qualified to engage in sales forecasting. Most libraries have a copy of National Trade and Professional Associations of the United States, which lists these groups. Entrepreneurs can also obtain-current information about business trends by regularly reading trade publications and magazines focused on small business ownership, such as Entrepreneur and Inc. Government publications, such as the Federal Reserve Bulletin, Survey of Current Business, and Monthly Labor Review, may also be of general interest. Subscribing to professional forecasting services is another way to obtain forecasts of general business conditions or specific forecasts for given industries.
Despite the difficulties, a small business entrepreneur should not neglect the forecasting task. Instead, she or he should remember how important the sales outlook in the business plan is to obtaining financing. The statement “We can sell as many as we can produce” does not satisfy the information requirements of potential investors.
The Forecasting Process
Estimating market demand with a sales forecast is a multi-step process. Typically, the sales forecast is a composite of several individual forecasts, so the process involves merging these individual forecasts properly.
The forecasting process can be characterized by two important the point at which the process is started and the nature of the predicting variable. Depending on the starting point, the process may be designated as a breakdown process or a buildup process. The nature of the predicting variable determines whether the forecasting is direct or in direct.
The Starting Point
In the breakdown process, sometimes called the chain-ratio method the forecaster begins with a variable that has a very large scope and systematically works down to the sales forecast. This method is frequently used for consumer products forecasting. The initial variable might be a population figure for the target market. Through the use of percentages, an appropriate link is built to generate the sales forecast. For example, in an early marketing plan, the founders of Mayan Pigments identified market segments, including printing inks, paints and coatings, plastics textiles and leathers, and paper and paperboard. Relying on secondary data from industry sources, they forecast global and domestic market demands for the various segments both in dollars and by product weight. They identified direct competitors and estimated their percentage shares of the market. Working from their startup size and target market, they then forecast the share they felt they could acquire in their first years.
One source of data is the U.S. Census Bureau, which compiles statistics on various population segments by, for example, gender, age, geographic location, and household income. Additional data on customer segment may be obtained through state and local government agencies, chambers of commerce, trade associations, and private enterprise sources, such as Sales & Marketing Management magazine’s “Survey of Buying Power.”
In contrast to the breakdown process, the buildup process calls for identifying all potential buyers in a target market’s submarkets and then adding up the estimated demand. For example, a local dry-cleaning firm that is forecasting demand for cleaning high school letter jackets might estimate its market share within each area school as 20 percent. Then, by determining the number of high school students obtaining a letter jacket at each school---perhaps from school yearbooks---an analyst could estimate the total demand.
The buildup process is especially helpful for industrial goods forecasting. To estimate potential, forecasters often use data from the Census of Manufacturers by the U.S. Department of Commerce. The information can be broken down according to the North American Industry Classification System (NAICS), which classifies businesses by type of industry. Once the code for a group of potential industrial customers has been identified, the forecaster can obtain information on the number of establishments and geographic location, number of employees, and annual sales. A sales forecast can be constructed by summing this information for several relevant codes.
The Predicting Variable
In direct forecasting, which is the simplest form of forecasting, sales is the forecasted variable. Many times, however, sales cannot be predicted directly and other variables must be used. Indirect forecasting takes place when surrogate variables are used to project the sales forecast. For example, if a firm lacks information about industry sales of baby cribs but has data on births, the strong correlation between the two variables allows planners to use the figures for births to help forecast industry sales for baby cribs.
For a new business, there are few things as important as identifying your market---nothing happens until someone buy something from your company. And if you plan to grow your business, understanding your market is essential. In this chapter, we introduced you to the steps necessary for putting together a marketing plan. The plan will be a living document for you as you manage your business. Every day, you will learn more about your market and how you can meet customer needs. And the marketing plan has an impact on many other areas of your business. In later chapters, you will see that your marketing strategy affects how many people you employ and what skills they need, the volume and selection of your inventory, the production processes you use, and many other business functions.
Estimation Market Potential
A small business can be successful only if sufficient market demand exists for its product or service. A sales forecast is the typical indicator of market adequacy, so it is particularly important to complete this assessment prior to writing the marketing plan. An entrepreneur who enters the marketplace without a forecast is much like an enthusiastic swimmer who leaves the diving board without checking the depth of the water---and the results can be nearly as painful! Many types of information from numerous sources are required to gauge market potential. This section discusses these information needs as it examines the forecasting process.
The Sales Forecast
Formally define, a sales forecast is an estimate of how much of a product or service can be sold within a given market in a defined time period. The forecast can be stated in terms of dollars and/or units.
Because a sales forecast revolves around a specific target market, that market should be defined as precisely as possible. The market description forms the forecasting boundary. If the market for desks is described as “all offices,” the sales forecast will be extremely large. A more precise definition, such as “government agencies seeking solid wood desks priced between $800 and $1200,” will result in a much smaller but possibly more useful forecast.
One sales forecast may cover a period of time that is a year or less, while another may extend over several years. Both short-term and long-term forecasts are needed for a well constructed business plan.
A sales forecast is an essential component of the business plan because it is critical to assessing the feasibility of a new venture. If the market is insufficient, the business is destined for failure. A sales forecast is also useful in other areas of business planning. Production schedules, inventory, and personnel decisions all start with a sales forecast. Obviously, a forecast can never be perfect, and entrepreneurs should remember that a forecast can be wrong in either direction---either underestimating potential sales or overestimating potential sales.
Limitations to Forecasting
For a number of practical reasons, forecasting is used less frequently by small firms than by large firms. First, for any new business, forecasting circumstances are unique. Entrepreneurial inexperience, coupled with a new idea, represents the most difficult forecasting situation, as illustrated in Exhibit 7.7. An ongoing business that requires only an updated forecast for its existing product is in the most favorable forecasting position.
Second, a small business manager may be unfamiliar with methods of quantitative analysis. Not all forecasting must be quantitatively oriented---qualitative forecasting is often helpful and may be sufficient---but quantitative methods have repeatedly proven their value in forecasting.
Third, the typical small business entrepreneur and his or team know little about the forecasting process. To overcome this deficiency, the owners of some small firms attempt to keep in touch with industry trends through contacts with appropriate trade associations.
Exhibit 7.7 Dimensions of Forecasting Difficulty
The professional members of a trade association are frequently better qualified to engage in sales forecasting. Most libraries have a copy of National Trade and Professional Associations of the United States, which lists these groups. Entrepreneurs can also obtain-current information about business trends by regularly reading trade publications and magazines focused on small business ownership, such as Entrepreneur and Inc. Government publications, such as the Federal Reserve Bulletin, Survey of Current Business, and Monthly Labor Review, may also be of general interest. Subscribing to professional forecasting services is another way to obtain forecasts of general business conditions or specific forecasts for given industries.
Despite the difficulties, a small business entrepreneur should not neglect the forecasting task. Instead, she or he should remember how important the sales outlook in the business plan is to obtaining financing. The statement “We can sell as many as we can produce” does not satisfy the information requirements of potential investors.
The Forecasting Process
Estimating market demand with a sales forecast is a multi-step process. Typically, the sales forecast is a composite of several individual forecasts, so the process involves merging these individual forecasts properly.
The forecasting process can be characterized by two important the point at which the process is started and the nature of the predicting variable. Depending on the starting point, the process may be designated as a breakdown process or a buildup process. The nature of the predicting variable determines whether the forecasting is direct or in direct.
The Starting Point
In the breakdown process, sometimes called the chain-ratio method the forecaster begins with a variable that has a very large scope and systematically works down to the sales forecast. This method is frequently used for consumer products forecasting. The initial variable might be a population figure for the target market. Through the use of percentages, an appropriate link is built to generate the sales forecast. For example, in an early marketing plan, the founders of Mayan Pigments identified market segments, including printing inks, paints and coatings, plastics textiles and leathers, and paper and paperboard. Relying on secondary data from industry sources, they forecast global and domestic market demands for the various segments both in dollars and by product weight. They identified direct competitors and estimated their percentage shares of the market. Working from their startup size and target market, they then forecast the share they felt they could acquire in their first years.
One source of data is the U.S. Census Bureau, which compiles statistics on various population segments by, for example, gender, age, geographic location, and household income. Additional data on customer segment may be obtained through state and local government agencies, chambers of commerce, trade associations, and private enterprise sources, such as Sales & Marketing Management magazine’s “Survey of Buying Power.”
In contrast to the breakdown process, the buildup process calls for identifying all potential buyers in a target market’s submarkets and then adding up the estimated demand. For example, a local dry-cleaning firm that is forecasting demand for cleaning high school letter jackets might estimate its market share within each area school as 20 percent. Then, by determining the number of high school students obtaining a letter jacket at each school---perhaps from school yearbooks---an analyst could estimate the total demand.
The buildup process is especially helpful for industrial goods forecasting. To estimate potential, forecasters often use data from the Census of Manufacturers by the U.S. Department of Commerce. The information can be broken down according to the North American Industry Classification System (NAICS), which classifies businesses by type of industry. Once the code for a group of potential industrial customers has been identified, the forecaster can obtain information on the number of establishments and geographic location, number of employees, and annual sales. A sales forecast can be constructed by summing this information for several relevant codes.
The Predicting Variable
In direct forecasting, which is the simplest form of forecasting, sales is the forecasted variable. Many times, however, sales cannot be predicted directly and other variables must be used. Indirect forecasting takes place when surrogate variables are used to project the sales forecast. For example, if a firm lacks information about industry sales of baby cribs but has data on births, the strong correlation between the two variables allows planners to use the figures for births to help forecast industry sales for baby cribs.
For a new business, there are few things as important as identifying your market---nothing happens until someone buy something from your company. And if you plan to grow your business, understanding your market is essential. In this chapter, we introduced you to the steps necessary for putting together a marketing plan. The plan will be a living document for you as you manage your business. Every day, you will learn more about your market and how you can meet customer needs. And the marketing plan has an impact on many other areas of your business. In later chapters, you will see that your marketing strategy affects how many people you employ and what skills they need, the volume and selection of your inventory, the production processes you use, and many other business functions.
การแปล กรุณารอสักครู่..