Remember, there is no single way to forecast any business. It’s often very creative.

Magda was looking at forecasting sales for a small restaurant. She hadn’t locked in the location at that point, but she had a pretty good idea of the small size she wanted. She decided she would be able to seat six tables of four people each as a starting point. She knew of course that things might change when she actually decided on the space to rent; but she had to start somewhere, so six tables of four it was.

Then she did some simple math: six tables of four means at capacity she would be serving 24 meals. Meals take about an hour at lunch, and about two hours at dinner. She figured she’d have one servicing of lunch and two of dinner, roughly calculating the 5-5:30 crowd as the first serving, and the 7:30-8:00 crowd as the second serving. So an absolutely full lunch service in a day would be 24 lunches. An absolutely full dinner service in a day would be 48 dinners.

She decided that an average lunch would be $10 of food and $2 of beverage. And that an average dinner would be $20 food and $4 beverage.

And now I stop for a second, and we consider this. Magda isn’t turning to some magic information source to find out what her sales will be. She isn’t using quadratic equations and she doesn’t need an advanced degree in calculus. She does need to have some sense of the estimated guess. Ideally she’s worked in a restaurant or knows somebody who has, so she gets a sense of reasonableness.

So, end of digression. She can do some numbers. At capacity she sells 24 lunch and 48 dinners in a day, with matching beverages. She can do a simple calculation to figure a good day’s sales:

1. Lunches are 24 times 10 plus 24 times 2, which comes to 240 plus 48, or 288, when she’s at full capacity.
2. Dinners are 48 times 20 plus 48 times 4, which comes to 960 plus 188, or 1148, when she’s at full capacity.

These numbers are not magic. The point of this example is simply that Magda finds ways to make sense of her forecast. As you work with yours, don’t look for some answer out there in the world, like a right answer to a puzzle; look for ways to break your assumptions down into the logic you need to work with them.

Magda should get on a computer and put that in a spreadsheet. Make it four rows labeled lunches, dinners, lunch beverage, and dinner beverage. And then add a row for other, because there is always other. Spread these assumptions out with the simple math so you can see the assumptions.

There’s an example in the illustration here. All the math is simple. If you don’t know how to work a spreadsheet, using formulas for rows and columns, go to spreadsheet logic for some resources. Don’t get fear of math, or fear of finance. The math is simple.

Having figured out what sales might be in a maximum day, then she looks at how sales might vary for the days of the week. The provides a weekly base line. It isn’t just four weeks per month; multiply an average week times 52, then divide that product by 12 to get an average month. In the example, you can see how Magda estimated conservatively, with less for example on Sunday lunch, and closing at lunch on Saturday and Sunday. She knows she’s not going to get a full capacity day that often. So she’s calculated a base line month as show, with around 350 lunches and 1044 dinners. But she’s also just starting up, so she comes up with an educated guess for a lot lower than that, around half the capacity.

By the way, she can do that kind of a forecast graphically, with the right tools. Draw the line to help yourself visualize the way the numbers flow. Here’s an example of how a simple line drawing can forecast the lunch number for the first year.

Remember, please,these are not scientific numbers. They are based on assumptions. What’s going to happen with the plan-as-you-go business plan is that you’ll review these numbers every month, and tune them against reality. So therefore you don’t have to guess right for long stretches into the future; you have to start with a reasonable guess and then start tracking.

Furthermore, you don’t have to be right from the beginning because as your business goes on, you constantly improve your forecast. After the first month, as you look at the second months and all the rest of the forecast, you have the results from the first month to work with. Always review, and revise as the review indicates.

So with Magda and her restaurant, she starts the forecast and the first month results come in. Oh-oh, lunch sales are much less than she thought, but then dinner sales are slightly more.

So here’s the difference between what was planned and what happened:

And from there, Magda revises her sales forecast. Why wait? She had a logical first guess based on some simple numbers, but then she already has real-world results. So revise. Here’s a revision:

And now her sales forecast is up and running. Plan as you go.

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