Is this an online business? If so, your ability to sell is based off the amount you can spend to drive traffic to your site, not the total size of the market. So you need to think through your marketing plan/budget. Say you have $20K to spend, and you think the best way in is digital (which it probably would be).
You could aim high up the top of the funnel to build awareness like Crazy Egg did (a heat mapping tool to see how people navigate websites). They correctly surmised that a big market for this tool would be web designers, so spent $10K on banner advertising on web template sites - a huge amount of traffic in a small amount of time.
If you can’t narrow your target market down that precicely your spend will be more scattergun through something like Google Display (perhaps add in YouTube) or Facebook, aiming at relevant pet owners - need to develop personas to identify how to reach them. Are there high traffic blogs you can pay to be involved with? A little inbound marketing could work well too.
Or you could aim low down the funnel at people wanting to buy an item right now. - Adwords, Pinterest, maybe Instagram.
Ultimately you’ll be paying perhaps $0.50-$2 per click to your website, of which only a small percentage will be buying something - say 20%. So think through your numbers that way and I suspect you’ll end up with a more realistic traffic estimate.
Girl From Mars is making good points. The size of you customer base will depend on how much you spend to get it. And that will depend on your product and how you plan to sell it. Internet advertising is relatively inexpensive, but you will be competing directly with everyone else on earth with the same kind of product. If your customer base is local you may need more directed advertising. You may need to purchase email or snail mail lists for direct marketing. And don’t forget the time you may have to spend with customers, answering emails, making phone calls, sometimes repeatedly to close a deal.
Also, if you can find good figures to make a sales volume prediction that means you are in a very competitive market.
When you collected the eBay data did you remember to keep it separated by seller? If not you’ll want to go back and collect it again.
Typically sales volumes in mature markets follow a declining exponential curve. i.e. the biggest seller sells half the total. The next biggest seller sells half of what’s remaining, etc. “half” is a ballpark; it could be 3/4ths or 1/4th depending on the details of the market.
Less mature markets tend to have lots of very small sellers where some are bigger than others, but all are small, say under 10%.
If you are entering a market like the former, a tiny fraction of 1% is the best you can hope for, and that only after the dedicated (ie spendy) marketing efforts described just above. IOW, you start out in last position in that exponential decay at selling 0.00001% of the market and “pay to play” to work your way up the chain, passing the other lowest sellers in turn as your WOM or online rep or paid marketing gains traction.
In a market like the latter you’ll probably start out a bit better, but also be unable to move much above the level you start at.
Markets where the product is, or is perceived as, a commodity tend to be more like the latter. You’ll struggle to differentiate your product or your buying experience and are forced to compete on margin and internal efficiency. IOW, willingness to do all this for almost no gain. Compare domestic airlines; same tolerable-quality product, same prices, same same same boringness. The vast majority of online retailers and online markets fall in this category as ultimately they’re all pushing the same made-in-Asia commodity crap.
Markets where the product (or the seller) is differentiable tend to be like the former. The hot sellers find their margins and their volume both going up. Compare Apple to the horde of Android clones.
Note that perception is everything. I’m not asserting that all domestic airlines are the same, nor that Apple has objectively better products. I don’t believe in either of those propositions. But a hell of a lot of the buying public does. Your job is to teach them. Be forewarned: they’re slow learners.
Thanks, good advice for marketing, but I think maybe I didn’t word my question well enough. I need to write up a sales forecast for my first year in business. I don’t have any past sales to base the forecast off, so the next best thing is to use competitor’s sales. The only place I was able to find that data was on eBay.
The marketing plans will give me a better idea of market demand, but still no actual sales numbers I could use.
I have an ebay store as a hobby business that sells about 1300 items annually and generates 110,000-120,000 in annual gross sales before expenses. I sell mid level to mid upper tier men’s and women’s new footwear at about half off retail. Usual sale range is $50-$150.
Boutique type marketing and retail is very, very difficult unless you have an absolute lock on what your clientele desires. There are already a metric ton of online pet boutiques out there. What is your differentiator and value proposition going to be? The majority of people doing similar “select clientele boutique” things have their businesses roll over and die in 1-2 years.
Trying to estimate your market off ebay sales is a pointless exercise. The barriers to entry for you should be very low - A sales front end website with integrated POS system and merchandise. Why don’t you simply set up your own ebay store (it’s cheap to do) and see how your selected items move. It will give you a feel for your ability to pick salable merchandise. If you’re an ace at it move to your own site, if you’re not you can clearance out your stock for cost and move on without missing a mortgage payment. It will also tell you where your real world numbers are going to wind up.
As an after hours side business it might make sense. If this is going to be your main full time source of income it often turns out you are not getting paid much for your time in doing these kinds of things. Retail is a tough game the rule of thumb is you need 3X as much start up money as you thought and twice the amount of free time. It’s all about turning inventory and cost control.
I’d encourage baby steps (ie the ebay store or similar) until you are more familiar with your market. Your credit being tied up by $20,000 to $40,000 worth of potentially hard to sell exclusive boutique inventory can break you if you don’t manage it correctly.
As a last note I’ve been doing this (as a store) for about 6 years now. Finding out what sells and what does not is a long, tortuous and expensive process where I have had to sometimes clear out a number of non-moving items for less than I paid after expenses. And I could have sworn these would be great sellers. They weren’t.
I make a lot fewer buying mistakes now but that is only through hard experience and I still make a few. And this is popular general sales merchandise not exclusive, boutique stuff where the demographic is much narrower.
Ah, that’s interesting to hear you say that. I have noticed when I was on the board of an animal rescue group, lots of things we bought to resell as fundraisers didn’t sell and we could never figure it out. Things like nice looking jewelry hardly sold, but tshirts (where you’d assume every man jack has a hundred of already) sold like hotcakes. I’ve been thinking that will be one of my “lessons learned” as I do this venture!
Don’t waste time with sale projections on the front end. It’s a pointless exercise. Start small, keep inventory limited, invest in a good simple accounting program like Quickbooks or similar. Keep an eye out for good sales on tape, boxes etc at Uline and Staples. Use newspaper for packing material. You can get deals up to 30%-40% off on top of sale prices for packing materials using Staples coupons. Use the free boxes USPS gives you for Priority shipping. Work your suppliers for deals.
RESIST THE URGE TO OVERBUY INVENTORY YOU LOVE until it’s a proven quantity. Lower sales is less financially hazardous than overstocked non-moving inventory you have tied up your credit with.
It took me 4 years before a USPS employee told me I could just drive up and leave my boxes in a cart on the rear USPS dock like a commercial business vs parking and standing in line for 10-20 minutes daily with giant bags full of boxes. That saved untold hours of time but I didn’t know until someone told me.
US Priority shipping is faster and less expensive than the lower tiers if purchased online or via ebay and you can use the free USPS Priority boxes. This saves .50 per shipment to 1.50 depending on the size of the box and it gets to your customer twice as fast. It’s all the little things.
A sales projection should be made, even if it’s a total guess out of the blue. This at least gives you something to compare yourself to that helps you relate actual sales to long-term goals. It’s one thing to say “$100 sold this week” and another to be able to say “I projected $50 and sold $100.” The reason for this is that business owners are prone to forget that they have learned things. You internalize the knowledge and think that you always thought it would be true. A written projection or plan forces you to recognize what you have learned.
What’s much more important than the projection, though, is the per-item profit, calculated as if you had to pay someone to do the work. Example from real life: a particular craft seller always felt like they didn’t make enough money until they landed their dream sale - literally half a year’s income in a single wholesale order with the likelihood of ongoing volume sales. That’s when they hired someone to help with production and realized that the production/trimming/packing/shipping process was so labor intensive, that paying an employee to do it meant they lost $2 an hour. They only “made money” before because the owner’s time had no dollar value attached to it.
In particular, don’t underestimate how long it takes to pack and ship items. It’s very easy to think it takes 5 minutes and discover you just spent 15.
You haven’t given us much information about your business, something I can understand. But as dracoi has said, your sales estimate will just be an arbitrary baseline that you can compare against in the future. In reality you have no reason to expect any sales for a brand new business. What you do need to do is figure out the costs you will incur to acquire customers and what your sales and profit margins need to be to justify those costs. That will establish a target you must meet instead of just a guess at what you may achieve.