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Ed's AV Handbook
Batting practice for the AV Professional
and primer for the novice

Chapter 10  Page 6

AV Business & Marketing

Sales forecast calculation

A sales forecast based on industry experience is typically sufficient to determine whether your targeted trade area can sustain a profitable-number.  However, a more rigorous forecast will reinforce your data.   It can also reduce the uncertainty of others involved in your project -- financial partners, spouse, employees, friends.  The following method provides qualified evidence. 

The Sales Forecast

1. Web search total U.S. sales of independent AV dealers. 

     My search began with
the CTA*.  I used their 2016 $1.9 billion factory sales projection of home audio
     components*.  I increased the number by a 33%* gross profit margin to create a retail number.
 
    
($1.9 billion) x (1.5) = $ 2.85 billion U.S. AV retail.

     *CTA- Consumer Technology Association 

     * My search is limited to home audio/video components to provide a conservative number. 
        In that regard -- given the big box dominates the TV category I avoided TV sales.

     * 33% GP supports a conservative value.

2. Web search total U.S. retail sales.
     2016 U.S. Census report = $ 415 billion

3. Web search your prospective trade area's total retail sales. 
     
For example -- 2016 U.S. Census SacramentoMetro total = $ 4.2 billion
 
4. Compute your trade area's market share of U.S. retail sales as a percentage.
     Divide your market's total retail sales by total U.S. retail sales.
     For example -- SacramentoMetro: 4.2 billion รท 415 billion = 0.01 or 1% 


5. Compute your trade area's total projected independent AV retail sales.
     Multiply total U.S. AV sales by your market share.
     For example -- SacramentoMetro (1%) x ($2.85 billion) = $ 28.5 million
                           
     Assume the big box owns 50% of total sales. 

     Therefore, the
projected SacMetro AV independent AV dealer sales = $14.25 million.

6. 
Compute your forecast.
      Subtract the sales of independent competitors from the result of #5.


      - Make a best guesstimate per dealer
      - Or divide #5 by the number of significant competitors.
      - If you are a one or two person custom dealer -- divide #5 by a factor of 75*.
        *Dividing by 75 is not supported by any economic study.  It's my best guess.

     
Use this result as your sales forecast number.

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Ed's AV Handbook   
Copyright 2007 Txu1-598-288 Revised 2021


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