Saint Francis College

Pascual B. Gutay St., Allen, N. Samar

LEARNING MODULE IN ENTREPRENEURSHIP 1

MODULE 7
FORECASTING THE REVENUES
OF THE BUSINESS

WEEK: (ONE WEEK: APRIL 12-16, 2021)

GRADE LEVEL: 11
LEARNING COMPETENCIES:
- FORECAST THE REVENUES OF THE BUSINESS TLE_ICTAN11/12EM-Ia-2

I. CONCEPT

You have learned in the previous lesson the 4Ms of operations, you now have the idea on what product/s to
manufacture and sell. Now, you also have a business model. One of the most challenging parts in developing a
business plan is the financial plan. This part allows the entrepreneur to make decisions based on financial assumptions
without even having started the business. Therefore, these financial projections should be given the most attention by
the entrepreneur.

Let us now examine how the sale of products generates revenues. In this lesson, we will identify the mark-
up and selling price of the product. We will also project the revenues that the business will make from the sale of
products

II. EXAMPLES AND DISCUSSION

Making informed estimates requires careful considerations on several factors that might affect the outcome
of your travel such as, distance from home to school, the means of transportation you will be taking, the number of
passengers and etc. Traveling from home to school on regular basis had helped you arrive with an estimate that was
very close to the actual time of arrival.

Considering these factors are essential in making informed estimates by the entrepreneur. Since the
business he/she is venturing hasn’t started yet, it is important that these factors affecting forecasting will be
determined to better help him/her in making the best decisions for the business.

The entrepreneur after realizing the potential for profit of his/her business concept, the next step is to
estimate how much the revenue is on daily, monthly and annual basis. Before going to forecasting and projecting the
revenues of the business, let us determine first what revenue is.

REVENUE is a result when sales exceed the cost to produce goods or render the services. Revenue is recognized
when earned, whether paid in cash or charged to the account of the customer. Other terms related to revenue includes
Sales and Service Income. Sales is used especially when the nature of business is merchandising or retail, while
Service Income is used to record revenues earned by rendering services.
 You have just learned about what revenue is. This time, let us study the various factors to consider in
forecasting revenues.

The entrepreneur would want his/her forecasting for his/her small business as credible and as accurate as
possible to avoid complications in the future. In estimating potential revenue for the business, factors such as external
and internal factors that can affect the business must be considered. These factors should serve as basis in forecasting
revenues of the business. These factors are:

1. THE ECONOMIC CONDITION OF THE COUNTRY. When the economy grows, its growth is
experienced by the consumers. Consumers are more likely to buy products and services. The entrepreneur
must be able to identify the overall health of the economy in order to make informed estimates. A healthy
economy makes good business.
2. THE COMPETING BUSINESSES OR COMPETITORS. Observe how your competitors are doing
business. Since you share the same market with them, information about the number of products sold
daily or the number of items they are carrying will give you idea as to how much your competitors are
selling. This will give you a benchmark on how much products you need to stock your business in order
to cope up with the customer demand. This will also give you a better estimate as to how much market
share is available for you to exploit.
3. CHANGES HAPPENING IN THE COMMUNITY. Changes’ happening in the environment such as
customer demographic, lifestyle and buying behavior gives the entrepreneur a better perspective about the
market. The entrepreneur should always be keen in adapting to these changes in order to sustain the
business. For example, teens usually follow popular celebrities especially in their fashion trend. Being
able to anticipate these changes allows the entrepreneur to maximize sales potential.
4. THE INTERNAL ASPECT OF THE BUSINESS. Another factor that affects forecasting revenues in the
business itself. Plant capacity often plays a very important role in forecasting. For example, a “Puto”
maker can only make 250 pieces
of puto every day; therefore he/she can only sell as much as 250 pieces of puto every day. The number of
products manufactured and made depends on the capacity of the plant, availability of raw materials and
labour and also the number of salespersons determines the amount of revenues earned by an entrepreneur.

Now that all factors affecting forecasting revenues are identified, you can now calculate and project potential revenues
of your chosen business. The table below shows an example of revenues forecasted in a Ready to Wear Online Selling
Business.

Example: Ms. Fashion Nista recently opened her dream business and
named Fit Mo ’to Ready to Wear Online Selling Business, an online selling business which specializes in ready to
wear clothes for teens and young adults. Based on her initial interview among several online selling businesses, the
average number of t-shirts sold every day is 10 and the average pair of fashion jeans sold every day is 6.

From the information gathered, Ms. Nista projected the revenue of her Fit Mo ’to Ready to Wear Online Selling
Business.
 She gets her supplies at a local RTW dealer in the city. The cost per piece of t-shirt is 90 pesos, while a pair
of fashion jeans costs 230 pesos per piece. She then adds a 50 percent mark up to every piece of RTW sold.

Mark up refers to the amount added to the cost to come up with the selling
price. The formula for getting the mark up price is as follows:

Mark Up Price = (Cost x desired mark-up percentage)

Mark Up for T-shirt = (90.00 x .50)
Mark Up for T-shirt = 45.00

In calculating for the selling price, the formula is as follows:

Selling Price = Cost + Mark Up
Selling Price = 90.00 + 45.00
Selling Price for T-shirt = 135.00

Table 1 shows the projected daily revenue of Ms. Nista’s online selling business. Computations regarding
the projected revenue is presented in letters in upper case A, B, C, D, and E.

Table 1
Projected Daily Revenue
Fit Mo 'to Ready to Wear Online Selling Business

Cost per Mark-up Selling Projected Projected

Unit 50% Price Volume Revenue
Type of (A) (B) (C) (D) (E)
RTW's
Average
No. of
(Daily)
Items Sold
(Daily)

(A) (B)= (A x .50) (C)= (A+B) (D) (E) =(C x D)

T-Shirts 90.00 45.00 135.00 10 1,350.00

Jeans 230.00 115.00 345.00 6 2,070.00
Total 320.00 160.00 480.00 16 3,420.00
 Table 2 shows the projected monthly and yearly revenue of Ms. Nista’s online selling business.
Computations about the monthly revenue is calculated by multiplying daily revenues by 30 days (1 month).

Example, in table 1 the daily revenue is 3,420.00. To get the monthly projected revenue it is multiplied by
30 days. Therefore,

Projected Monthly Revenue = Projected daily revenue x 30 days

Projected Monthly Revenue = 3,420.00 x 30
Projected Monthly Revenue = 102,600.00

On the other hand, the projected yearly revenue is computed by multiplying the monthly revenue by 12
months. The calculation for projected yearly revenue is as follows.

Projected Yearly Revenue = Projected daily revenue x 365 days

Projected Yearly Revenue = 3,420.00 x 365
Projected Yearly Revenue = 1,248,300.00

TABLE 2
Projected Monthly and Yearly Revenue
Fit Mo 'to Ready to Wear Online Selling Business

Type of Selling Projected Projected Projected Projected

RTW's Price Volume Revenue Volume Revenue

Average Average No. of

No. of Items Items Sold
(Monthly) (Yearly)
Sold (Yearly)
(Monthly)

(C)= (A+B) F= (D x 30 days) G= (C x F) H= (D x 365 days) I= (C x H)

T-Shirts 135.00 300 40,500.00 3,650 492,750.00

Jeans 345.00 180 62,100.00 2,190 755,550.00

Total 480.00 480 102,600.00 5,840 1,248,300.00

 Table 3 shows the projected monthly revenues covering one year of operation. The table shows an average
increase of revenue every month by 5 percent except June, July to October and December. While the month of June
has twice the increase from previous month, 10 percent. Let us consider that months covering July to October are
considered to be Off-Peak months, therefore sales from July to October are expected to decrease. It is assumed that
there is no increase in revenue from July to August while from August to October the decrease in revenues is 5 percent
from previous month. Since revenues from sales of RTW’s are considered to be seasonal, it assumed that there is 10
percent increase in revenue from November to December.

Computation for assumed increase of revenue on specific months is as follows:

Projected Monthly Revenue (Increase) = Revenue (January) x 5 % increase

Projected Monthly Revenue (Increase) = 102,600.00 x .05 Projected Monthly Revenue (Increase) = 5,130.00

Projected Revenue for February = Revenue (January) + Amount of increase

Projected Revenue for February = 102,600.00 + 5,130.00
Projected Revenue for February = 107,730.00

On the other hand, decrease in revenue is computed as follows:

Projected Monthly Revenue (Decrease) = Revenue (August) x 5 % increase
Projected Monthly Revenue (Increase) = 144,041.14 x .05 Projected Monthly Revenue (Increase) = 7,202.06

Projected Revenue for September = Revenue (August) - Amount of decrease

Projected Revenue for September = 144,041.14 – 7,202.06 Projected Revenue for September = 136,839.08

Table 3
Projected Monthly Revenue
Fit Mo 'to Ready to Wear Online Selling Business

Month January February March April May June

Revenue 102,600.00 107,730.00 113,116.50 118,772.33 124,710.94 137,182.04

Month July August September October November December

Revenue 144,041.14 144,041.14 136,839.08 129,997.13 136,496.98 150,146.68

Important Assumptions:
February to May Increase of 5% from previous revenue
June Increase of 10% from previous revenue

July to August the same Revenue

September to October Loss 5% from previous revenue

November Increase 5% from previous revenue

December Increase 10% from previous revenue

The numbers in the last table are very attractive, having revenues that are increasing in numbers is a good
sign that a business is growing. However, an entrepreneur should not be overwhelmed on these revenues as these are
just gross revenue, this is not the final amount of profit or income an entrepreneur will get at the end of every period.
Take note that the amount of net revenue is still subjected to the expenses incurred in the operation of business.

III. EXERCISE/ACTIVITY
After learning the calculations presented, you can now compute the projected revenue by day, month and
year based on your business concept.

Aling Minda is operating a buy and sell business, she sells broomsticks (walis tingting) in her stall at a
local market. She gets her broomsticks from a local supplier for 25 pesos each. She then adds 50 percent mark-up on
each broomstick.

Every day, aling Minda can sell 30 broomsticks a day.

Use the template below and fill in the necessary figures based on the scenario. Remember to use the
factors to consider in projecting revenues and refer to tables 1, 2 and 3 as your guide.

Table 1
Projected Daily Revenue
Name of Business ___________________________
Merchandise/ Cost per Mark-up Selling Projected Projected
Products Unit ____% Price Volume Revenue
(A) (B) (C) (D) (E)

Average No. of
Items
(Daily)
Sold (Daily)

(A) (B)= (A x (C)= (A+B) (D) (E) =(C x D)

.50)
 Total

Use the calculations you have made in Table 1 to successfully complete the information in Tables 2 and 3
and calculate the projected monthly and yearly revenue of Aling Minda’s business.

Table 2
Projected Monthly and Yearly Revenue
Name of Business ___________________________
Merchandise/ Selling Projected Projecte d Projected Projected
Products Price Volume Revenue Volume Revenue

Average No. of Average No. of

Items Sold Items Sold
(Monthly) (Yearly)
(Monthly) (Yearly)

(C)= F= (D x 30 days) G= (C x F) H= (D x 365 days) I= (C x H)

(A+B)

Total

For Table 3, use the following assumed increases in sales every month. From January to May, 5 percent increase from
previous sales. For the month of June, 10 percent increase from previous sales. For the months July to December,
record the same sales every month.

Table 3
Projected Monthly Revenue
Name of Business ___________________________
Month January February March April May June

Revenue

Month July August September October November December

Revenue
 IV. EVALUATION

It is understood that you now know how to calculate mark-up and selling price of an item or merchandise.
Let us try the following situation to see if you have understood the concepts.

Kyle, a local entrepreneur is planning to sell 10-liter bottled water in his sari-
sari store. A local water purifying business in the city sells their 10-liter bottled water for 20 pesos each. Kyle wants to
add 25 per cent mark up from the original cost of 10-liter bottled water. Calculate how much mark-up Kyle should
add. Determine how much should be the selling price for 10-liter bottled water.