Number of Employees
The rough rule of thumb is that you should have at least $100,000 per full time employee or the equivalent—the most profitable print shops generate $125,000 per employee or more. If this forecast is much higher than using the other methods, you should look to reduce your number of employees.
Our example company had an average of 12 employees in 2008, so its sales per employee was $111,750. They did lose an employee in November and he has not been replaced, so they are starting with 11 employees. Based on the employee count staying at 11 and, perhaps, a small increase in sales per employee, based on price increases and/or efficiencies (3%), you can forecast sales at $1,266,000.
If you are expanding your space, you must increase your sales forecast correspondingly. It's not always a straight extrapolation if you dramatically take on more space. While there are some printing standards on sales per square foot, your equipment configuration and the types of services you offer may make it hard to compare to others. The key is that if the amount of space will change in 2009, then make reasonable sales forecast adjustments.
One good rule of thumb is that your rent should be no more than 7% of your sales and, ideally, less than 5%. In the example company, if rent (include property taxes, common area costs, etc.) is $5,500 per month, or $66,000 a year, and they want to keep their total expense at 5%, then they should budget sales at $1,320,000.
I recommend using all of these methods and then select the ones that you feel are most relevant for your company. In the example printing company, our sales forecasts range from $1,260,000 to $1,395,000. I would recommend using $1,325,000 as the goal, as that is in the mid-range. On the other hand, if they were adding more marketing and sales dollars to their budget, I may go with $1,395,000. Just remember that without any substantial changes you will follow the trends.
Sales forecasting is basically educated guessing, but it is vitally important in setting your company goals and budgets. Involve your key employees in the process. Using sound methods to arrive at goals will make them more real for your employees; otherwise the sales goal is just wishful thinking. I recommend that, once you have your forecast, you break it down by month based on past trends and the number of work days in the month. Monitor performance each month (or, better yet, weekly). Make adjustments in your sales processes and marketing as needed to insure that you meet your sales goal.
Finally, each year, review how you performed against your forecast and make adjustments in the methods you used to forecast for the coming year. It's worth the time and effort.
Mitch Evans is president of Mitch Evans Consulting, which is specifically targeted to meet the consulting needs of the quick and small commercial printing industry. His areas of expertise are in strategic planning, valuation, mergers and acquisition, financial planning, new technology, and "1-2-1" coaching. Evans regularly speaks to printing associations and groups on these and related subjects. Contact him at 561/351-6950 or firstname.lastname@example.org.