(18C) Direct Sales Consultant booklet

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extract(s) from the Working with your Business Consultant Professional Calculator series.

Revising Forecasts to Reflect Current Market Conditions …

Most sales forecasts are based on certain assumptions about, and
incomplete knowledge of, your market and competition. After the
forecasts are made, internal and external changes make your original
assumptions and your forecast incomplete. Examples of these changes
in the market that were not reflected in the original forecast are a
price drop (yours or your competitiors), advertising or promotional
campaign, rebate offer, introduction of a new product by a competitor,
or a change in distribution of your product. The formulas below helps
you revise your forecast, based on the perceived impact of the market
changes.

formula
NEWF=BASE+((A%+B%+C%)÷100)×BASE

where
BASE = original forecast
%A = expected change in sales for change in market A
%B = expected change in sales for change in market B
%C = expected change in sales for change in market C

Setting a Sales Price …

One method fro setting a unit sales price is to deternine the unit cost
of a product then multiply by a desired rate of return. The other values
you must know are your total operating cost and the number of units
you expect to sell.

formula
PRICE=(OPCOS÷UNITS+UNCOS)×(1+%RTN÷100)

where
PRICE = price per unit
OPCOS = total operating costs
UNITS = number of units sold
UNCOS = cost per unit
&RTN = desired percent rate of return


Break-Even Analysis …

Break-even analysis is a technique for analyzing the relationships
among fixed costs, variable costs and income. Until the break-even
point is reached (total costs equal total income), the producer operates
at a loss. After the break-even point, each unit produced and sold
makes a profit. The variables in the formula below are fixed costs,
variable costs per unit, sales price per unit of number of units sold and
gross profit.

formula
PROFI=#SOL×(USPR-UCST)-FXCO

where
PROFI = gross profit
#SOL = number of units sold
USPR = selling price per unit
UCST = costs per unit
FXCO = fixed costs of doing business

Leasing Calculations
Situations may exist where one or more payments are made in ad-
vance (leasing is a good example). These agreements call for the extra
payments to be made when the transaction is closed. A residual value
(salvage value) can exist at the end of the normal term.

Advance Payments …

The following formula calculates the monthly payment amount (PMT)
and the annual yield (I%YR) when one or more payments are made in
advance. The formula can be modified to accommodate other than
monthly payments by changing the constant 12 to the number of
payments per year. In that case, PMT, N and #ADV would apply to
the periodic payment. Remember to use the cash flow sign convention
(money paid out is negative, money received is positive).

formula
ADVPMT:PMT=(–PV–FV×(SPPV(I%YR÷12:N)))÷
(USPV(I%YR÷12:N–#ADV)+#ADV)

where
PMT = monthly payment amount
PV = loan amount
FV = balloon payment amount
I%YR = annual interest rate in percent
N = total number of monthly payments
#ADV = number of monthly payments made in advance

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