You can’t survive if you can’t manage your company’s cash flow.
Here is Part 1 of the 5 Most Common Cash-Flow Mistakes that Small-Business Owners make…Overestimating future sales volumes
1. Overestimating future sales volumes
Relentless optimism is a key trait of successful entrepreneurs. After all, what realistic person would persevere in the face of so many obstacles, so many naysayers and so much stress?
But while optimism is critical for a new business owner, letting it compromise your objectivity can be dangerous to your cash flow.
Unfortunately, not every interested looker will actually make a purchase. While your sales volumes may increase over the holidays, expecting them to double is a little unrealistic.
That’s why it’s so important to complete objective and realistic sales forecasting based on historical evidence and real numbers. By applying quantitative forecasting methods, you can use actual past revenue data from your own business or other businesses in your industry as a basis for tracking trends and predicting future sales. This information, along with some objective intuition, will help you come up with more realistic future sales projections.
Revenue forecasting can be especially difficult in your first few years of business because you don’t have past sales figures or as much experience to draw from. This is where working with a mentor from within your own industry may be extremely useful. A good business mentor can offer his or her own experience to help you project future sales, and even offer historical sales figures from personal experience to help you predict upcoming sales volumes.
No matter which method you select, make sure to base your future sales expectations on objective facts and sound judgment. This will save you from overspending based on pipe dreams that may never come true.
This snippet is thanks to entrepreneur.com: https://www.entrepreneur.com/article/249020, and written by Jared Hecht