Setting sales targets
Setting sales targets particularly for a new start-up business is one of the most difficult aspects experienced by clients in preparing a business plan but is essential in demonstrating the viability of the proposed business venture. Realistic sales targets can only be formulated from carrying out an extensive market research exercise covering the following 'areas'.

1. What is the market in which you are going to compete?
2. Analyse competitors, both direct and indirect
3. How will you position your product?
4. How will you sell to your customers?
5. Where will my initial business be generated from?
6. How will your business/product be promoted?
7. Is development of new technology going to have an impact on my proposed business?
8. Any impact of seasonality ?

Historically sales forecasts for new start-up businesses are widely optimistic and consequently the financial analysis generated in the business plan should be used as the standard against which progress is monitored.

Missing sales targets
As underachieving the sales targets in the business plan can have a significant adverse effect on the financial stability of the business so the impact of this problem needs to be assessed in the cash flow as soon as sales shortfall is realised. In addition to analysing the reasons behind the shortfall contingency planning such as reducing costs or seeking additional short term financial support to minimise the effect on the financial stability of the business should be implemented

Exceeding sales targets
Although exceeding sales targets generates additional revenue for the business the impact on resources, including human resources, should be taken into account in addition to impact on the cash flow forecast. It must also be assessed whether or not the increased level of sales is likely to be ongoing or whether the trend is likely to be transient only, as this has a major impact on planning.

Exceeding sales targets which result in increased profits may enable additional investment to be made in the business and also enable any surplus funding to be used more efficiently.

Activity 4