Taxes & business banking for the self-employed


Sales Forecasting for Freelancers who sell things

Last updated on Feb 21, 2020

Kate Bailey

Freelance Editor

Jul 17, 2019

For some, ''selling things'' is the foundation of their self employment. This presents unique challenges to people wanting to explore the feasibility of commerce for their business as it is often not apart of their education specifically. In this article, we are going to look at one of the first and most very important steps: how to forecast sales. This is because establishing commerce usually involves investment - and now we know why it's important...

It's 2019, and this is a year where we see the possibility of an ''instant'' audience. For example, a designer can create a slogan and image, and overnight it can go viral. Haters let it be known, this is just the world we live in. So, in this example, you could also see how an inbox full of requests of how to buy the work is easily enough motivation for the ''starving'' artist to sell the prints. Of course, this is just one example - you could be a bespoke soap maker or a cobbler and still be self-employed - we just wanted to cover off ''selling'' as a topic because which, unlike services you can negotiate, is a different beast. OK, let's start with some basics.

Immediately after starting your business, you want to build customer relationships, work on the product and service, but not fill in spreadsheets and juggle numbers? Unfortunately, you can not ignore it as a self-employed. A sales forecast, or revenue plan, gives you an initial overview to realistically plan your numbers.

With a sales plan, you can see if your goods (or even for those offering services, have your desired hourly pay match your minimum revenue). But where are you supposed to take the numbers from when they do not exist yet, or perhaps you are are just exploring? This is just one of the questions that come from considering your sales forecast, so let’s get started!

Why is sales planning so essential for small business?

When you start up, you may wonder if all of this is really necessary. You already have enough to do in the beginning, you may be very small and most likely just yourself. But if you start without the necessary preparation, you may be wasting time and energy in the longer term. It is an investment alone in understanding your business and spending time tinkering to make it as efficient as possible.

Without the right numbers, planning can quickly get out of hand. With sales planning, you'll learn that you would have to sell about 50 self-made bags a day at the stated price to stay at a break even, and that may not be feasible. So you can intervene directly and refine your concept.   

With your sales planning, you have can take on an entirely pragmatic,  analytical approach and immediately discover incorrect calculations. It can be a test or exercise of whether your business idea can survive in reality.

It is usually not so obvious if a business concept can work and there is an enormous risk of blindly trying something out. So, at least once, calculate your numbers. Today You will be very grateful towards Tomorrow You for doing these sorts of exercises.

Sales planning should be preceded by a site analysis, market analysis and competitive analysis. You take a specific place in the market and the more you know about it, the more accurate you can begin. What you will also need is your revenue calculation plan for the tax collection questionnaire, which should show the total revenue for the current year and the following year. If you are writing a business plan, writing an application for funding, or wanting to convince investors, sales planning is also a big part of it. It is a universal language in business, and people also want to work with others who are strategic, no matter the size of their operation.

How do you start with sales planning?

Before you pull your first jobs and build a basic data set, you're missing the real numbers for revenue planning. What can you do right now? It makes sense to start with your costing.

If you can clearly define how much money you should have every month, you have your minimum goal of required profit in mind. From this minimum profit, your calculation goes out. To this profit, you add your operating expenses and determine the minimum turnover. The minimum revenue is what you have to earn at least to earn a living and keep your business liquid.

Minimum profit + business expenses = minimum turnover. Voila! Now, do bear in mind that you do not want to be earning just this - and that is why it is important to challenge new revenue ideas amongst the entire economy of your business and your time, this is just a great way to snapshot your idea, product, service or otherwise.

Where do you get your numbers from?

Now the question becomes: can you actually generate this minimum turnover with your business concept? You divide the minimum revenue by the number of hours you can effectively bill or are ready, willing and able to work (which is not 24, by the way, if you want to stay strong in this business!). This will give you the hourly rate you should at least charge. Changing tack, if you want to sell products, you'll see how many you need to sell at the suggested price per hour. With the hourly rate you have a calculable factor, with which you can see if the project is feasible.

Since it's your own project, you can adjust factors such as the price of the services and products you offer. Now you can juggle the numbers until the balance is right. Since you are doing this for the first three years (ideally!), you still have the desired growth factor.

Now you can compare your numbers with average prices or the hourly rate of the competition. Where do you get the data from?:

- Federal Statistical Offices and State Offices

- tax offices

- Own location and market analyzes

The first year will always be hard, better to know now!

You are doing your sales planning for a total of three years and should adjust the forecast of every 12 months to reality. Over the years, the plans become more precise. If your sales in the first three years do not meet the stated goal and you help with financial aid (or, sacrifices - ramen, anyone?) and other sources of income, this is normal. In the beginning, your customer base is usually too small and your brand is not yet well enough known to generate enough sales.

These first three years are called "Death Valley", apparently, because many companies do not manage to remain liquid and have to cease their operations. Plan your projects well, be consistent with customers, and get enough savings so that you can compensate for bottlenecks in an emergency. A sales plan helps giving you have a clear idea of ​​how many products you need to sell a day or what hourly wages you should set, because then you also know how to run your business successfully.

One last note here on surviving this first year, is no discounts for friends - unless it is some of payment or exchange. This is something of a challenge and one we understand, but we have to reiterate ourselves and say a sellable product can have no discounts for pals.

You could be wanting to get into commerce or already have a well established business selling things, or your work. Regardless, it is always good to have a bird's eye view of the fundamentals of sales forecasting. Perhaps you are here because you are simply interested in how other people do it! Regardless, we hope you see that value in some of the functions we discussed, and are looking forward to implementing these in your own business. It could also very well be the case you are reading this article and had never thought on how to monetise your skillset or work. Forecasting is an exercise you can do with no obligation to actually begin selling or worse, investing. You can take any idea, and research what potential it could have in terms of your revenue stream but also how it would impact you on a day-to-day level as a business person.

This was the goal of exploring this topic from such a basic and broad level, most people in freelance can not operate with a ‘one size fits all’ mentality. Some might argue that’s why many who freelance are actually capable of it! In any case, this really was to make a case, that sales forecasting can be apart of your business in a myriad of different ways. Perhaps now you are already thinking of those ways, and hopefully, it brings some peace of mind setting these goals and being in tune with your business reality.