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You still need a business plan.

YOU STILL NEED A BUSINESS PLAN You never outgrow your need for this basic business tool. So get out your pencil and bring yours up to date.

How long has it been since you put together a comprehensive business plan that includes an up-to-date sales forecast? If you're like most firearms dealers, you haven't done it since you first went into business, if you even did it then. By now it's probably gathering dust in the back of your lowest file drawer, or long since been thrown out with the coffee grounds you wrapped in it.

Just in case you're among the teeming throng who has either abandoned your business plan, or never did one at all, I suggest you take yourself through the process one more time. A solid business plan is every bit as useful for a veteran gun dealer as it is for a retailing novice.

Sales Forecasting

Making a comprehensive business plan is a multi-step process that requires you to forecast sales, cost of goods, operating expenses, cash flow, and profit. Each forecast is crucial to the validity of your plan, but the most important is the sales forecast. So that's where you should start your new business plan, and this article will help you do it!

Begin your sales forecast by noting month-to-month sales trends from previous years. Go back at least five years, if you've been in business that long. You may find it helpful to list your sales figures on a chart as we have done in the example nearby. This will give you your basic forecasting data.

Past sales figures by themselves, however, don't give you all the information you need to write an intelligent sales forecast. You must also consider a multitude of other factors that produced past trends, and will influence trends in the future.

Here are some important factors you should keep in mind when you evaluate your firearms business sales history:

1. Your store's previous sales

levels.

2. Comparisons of similar selling

periods.

3. Your customers' tastes.

4. The general conditions of the

local and national economy.

5. Business conditions in the

firearms and hunting supplies

industry.

6. Changes in the level of

competition.

7. Changes in store policy.

8. Changes in your store's size,

space, or product mix.

9. Dates of holidays, number of

selling days.

10. Changes in your pricing

policies.

11. Changes in morale and

motivation among your

employees.

12. Advertising and promotion

campaigns.

13. Changes in relationships with

suppliers.

14. External conditions that might

have caused more potential

customers to move into--or out

of--your trading area.

15. Establish of goals and planning.

As you evaluate your store's sales history in light of these and other factors, you can see how they've influenced your past sales. More important, though, you can also work these variables into your projections of future sales.

Factoring in these variables doesn't have to be terribly complicated. The mathematical calculation for each is simple and logical. To show you how these calculations work, here are two examples of typical variables you should take into account in your planning.

Suppose your total sales for May, 1988 were $20,000 in 25 selling days. Assume, further, that you're planning for a 20 percent increase in sales month-to-month this year. If your number of selling days is going to drop to 23 days in May, 1989, what sales figure will give you a true 20 percent increase?

To factor in the decrease in selling days, multiply May, 1988 sales by 23/25. That will give you the break even dollar amount for the upcoming year. Then multiply that figure by 1 plus the 20 percent increase you expect based on your historical data and the other factors above.

$20,000 x 23/25 = $18,400

$18,400 x 1.20 = $22,080

Allowing for two fewer selling days, you need sales of $22,080 to achieve a true 20 percent increase in May, 1989 over May, 1988.

If the situation were reversed, and you had 25 selling days in May, 1989, compared to 23 in 1988, you simply invert the fraction and multiply last year's (1988) sales by 25/23. Multiply the product of that equation by 1.20 to figure in the 20 percent increase you want. Result: With two more selling days, you'll need $26,087 to make your true 20 percent increase.

Remember: To make your conversion fraction, put the number of days in the previous year's month on the bottom, and the number of days in your planning year's month on top. If you reverse the fraction, your projections will come out either very low or very high.

Another variable you can factor into your sales projections is rising (or falling) prices. For example, how should you change your sales plan if you expect rising prices to increase the amount of your average sales by 5 percent?

In this case, you start by multiplying last May's (1988) $20,000 sales figure by 1.05 to find the amount that will keep you even with last year's sales.

$20,000 x 1.05 = $21,000

So, on the basis of rising prices alone, you can plan for a $1,000 increase, assuming your unit sales remain constant. However, that $1,000 doesn't represent a true increase, since your own rising costs offset it. All it gives you is the new base from which to make your other calculations. Once you've figured your new base amount, however, you can calculate the effect of other factors, such as changes in the number of selling days, then multiply by 1.20 to arrive at a true 20 percent increase.

You'll have to devote some time to calculating how these variables will affect your sales. However, as you can see from the two examples we've worked here, making straight month-to-month comparisons can be very misleading. Without accounting for an increase in selling days, you could easily conclude that you're achieving good sales increases when your sales are actually dropping.

Do They Make Sense?

The next step in the sales forecasting process is to look at your projections and see if they make sense. Based on all the information available, are the dollar figures you have planned for sales a logical estimation? Are they sound enough to use in planning other parts of your business? Are they good enough for your banker?

Finally, compare your forecasts to actual sales results as you see them develop. Don't worry about occasional minor variations. But if you consistently over-or under-estimate your sales by 10 percent or more, you should find out what's causing the discrepancy. Then you can make whatever adjustments you think are appropriate.

Once you're satisfied the plan makes sense on all counts, make up a couple of alternate plans based on different assumptions. Thus, if something changes your sales results significantly, you can immediately switch to "Plan B."

For instance, you might want to write two or three alternate plans based on different assumptions about interest rates, inflation, and economic conditions. Your main sales forecast might assume strong economic conditions, but the economy may turn sour later in the year. What would happen to your sales projections in that event?

You should have plans for how you will react to a variety of possible changes that could affect your business either positively or negatively. Having those contingency plans will enable you to follow your primary plan more confidently.

You should not have to rewrite your entire plan every year. Once you have your basic plan, you should only have to adjust it periodically to adapt to changing conditions. However, make sure you rethink your entire plan at the beginning of each new year. Don't let the process intimidate you; take advantage of it, and get the best possible planning for your firearms store.
COPYRIGHT 1989 Publishers' Development Corporation
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Title Annotation:gunshop marketing
Author:Outcalt, Richard F.
Publication:Shooting Industry
Date:Mar 1, 1989
Words:1307
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