One crucial element of a good business plan is the sales projections section. Though all business owners hope that their companies will experience phenomenal success, it is important to keep the sales projections reasonable when presenting a business plan to investors.

How to Calculate Sales Projections

There are several elements that should already be in the business plan before sales projections can be calculated. These elements are advertising costs, audience response rates and the cost of the product.

Costs and response rates will vary by medium and the efficacy of the marketing strategy. However, some basic assumptions can be used to calculate this figure. Magazines and newspapers should be able to supply circulation numbers, while radio and television stations can provide audience numbers. Other media should also be able to calculate the average audience size. Generally, a response rate of about three percent is a reasonable assumption for most traditional marketing strategies.

After calculating production costs, let’s say the product will be sold at $500. Combined, your marketing strategy is expected to reach about 100,000 people. Of those 100,000, you expect about 30,000 will have a need for your project. Applying the three percent response rate to that 30,000, you can project that about 900 people will respond to the marketing, which gives you a sales projection figure of $450,000.