Entrepreneurship Review - EOU & Sales Forecasting

EOU Fixed 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 ROX Insurance, 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

EOU Variable 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 Techniques There are many methods for estimating sales More than one technique is used to help Common Forecasting Techniques Full Capacity Observational Data Industry Standard Industry/Seasonal Cycles Market Share Proportional Scaling

Sales Forecasting Techniques Full Capacity - simple, you forecast selling as many products as you can Ex: candles Observational Data - observation of competitors’ customers Ex: restaurant Industry Standards - proper sales forecast you will need to know how sales are estimated in your industry Ex: Retail store

Income Statement Income 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 months Sales per day by the # of days in the month Gradually scale up or down your sales for months 7 through 12

May 11, 2015 Please complete….. 1.Sales Forecast - Turn in - edit BP 2.Fixed Expenses - Edit BP 3.Income Statement - Turn in - edit BP