"Estimate your sales"

It's essential to research your potential business before making any life-changing decisions. This is the first stage of planning to start your own business. Having done your market research and identified your competition you need to look at whether your idea has the potential to support you.

Based on your market research you should be able to estimate the size of your market. You know the size of your market, number of competitors, average price per sale and how often people buy – right? Now put all of this information you have gathered together and put figures on your likely sales for the first time:

1. What is the total size of your market – e.g. if your customers are households – no of houses in your area, or if engineering companies – no of companies in your target area.
2. Divide this figure by the number of competitors you have plus yourself.
3. Multiply this amount by the average price per sale
4. Multiply that number by the total number of times your customer buys per year.

Have you thought about how much you expect to earn from the business? Remember in your own business you may be the last person to be paid. It is common for start-ups that the promoter does not take any wages for a period to allow the business to build up. Can you afford to do this? How much do you need personally to live on? Look at your monthly costs in detail:

• Mortgage or Rent
• Electricity, phone, heating costs
• Insurance costs – home, car, life
• Dependent family members – partner, children and associated costs such as schools etc
• Car costs
• Food, clothing lifestyle expenditure

You need to think about how much this adds up to and whether the business you are planning can sustain you. The next articles will cover remaining elements of completing your business plan.