Working off of Traffic Counts

[SouthernVelvetCafe]

The traffic count for a location I'm looking at is 38,500 a day.
I decided to calculate my sales projections for my coffee shop and bakery based on 1% of that traffic.
But, now my numbers look TOO good for a startup. As in, 250K profit the first year good.
I'm worried that using those numbers won't look realistic in my business plan.
Should I go down to a half a percent? Lower the amount of people I expect to buy a pastry? (I have it at one third of my customers.)
How realistic should my numbers be? How do I figure out the realistic numbers with no comps in the area?

[turkeysub]

You should be conservative in your projected conversion rates. Possibly go to a similar store and observe how their costumers behave to get a better idea of what your projections should be.

[SouthernVelvetCafe]

You should be conservative in your projected conversion rates. Possibly go to a similar store and observe how their costumers behave to get a better idea of what your projections should be.

Unfortunately I'm currently working outside of the state I plan to open in. I've done reconnaissance at our local Starbucks, but being the only one of its kind in the area in addition to it being on a military post may have, I worry, skewed the numbers. However, those numbers suggested thirty people an hour, whereas the numbers I came to from the traffic count resulted in a mere twenty-five an hour. Yet with payroll, food cost, and estimated utilities, my profits still come out, I feel, at too high of a number for a start-up business to be projecting. In order to break even, I would only need about ten an hour. However I worry that estimating at my break even, without giving an answer as to why I expect exactly that many customers, may come out looking like I fudged the numbers to get it there!
Apart from a traffic count, and checking out local competition, is there some secret formula to sales projections that I'm missing?

[Brian Altenhofel]

Not really a secret formula.

If you're just starting out, Starbucks wouldn't be a good comparison since they are a nationally recognized brand. A lot of their traffic will come from people that do the same thing I do while traveling: check Google Maps for the nearest Starbucks when wanting coffee.

[JC]

The traffic count for a location I'm looking at is 38,500 a day.
I decided to calculate my sales projections for my coffee shop and bakery based on 1% of that traffic.
But, now my numbers look TOO good for a startup. As in, 250K profit the first year good.
I'm worried that using those numbers won't look realistic in my business plan.
Should I go down to a half a percent? Lower the amount of people I expect to buy a pastry? (I have it at one third of my customers.)
How realistic should my numbers be? How do I figure out the realistic numbers with no comps in the area?

I would assume that the amount of people that pass by your business each day is the one important number you would need. Next would be ensuring that there aren't a bunch of other people in your area selling the same goods, so it's up to you to market yourself as unique and hopefully better to pull those customers away from other coffee/bakery shops if there are any. Also, signage and ease of access should help bring in more customers. Honestly, if you have great coffee and baked goods, people will look forward to stopping at your place as they're still at home getting ready for work, they'll think about your place when they're sitting around as a family on Saturday morning craving something sweet for breakfast, and Sunday while in church.

I would also consider offering deep discounts at first, maybe one day per week on certain items with an attractive sign out front to bring newbies in if you can afford it, like muffin/coffee for $1. And treat all customers with love and respect, as esp. in your field, great relationships often provide repeat business and referrals. I think these things will ultimately determine how much traffic you get.

[Harold Mansfield]

The traffic count for a location I'm looking at is 38,500 a day.
I decided to calculate my sales projections for my coffee shop and bakery based on 1% of that traffic.
But, now my numbers look TOO good for a startup. As in, 250K profit the first year good.
I'm worried that using those numbers won't look realistic in my business plan.
Should I go down to a half a percent? Lower the amount of people I expect to buy a pastry? (I have it at one third of my customers.)
How realistic should my numbers be? How do I figure out the realistic numbers with no comps in the area?

Passing traffic cannot be your only plan. You need to add info about how you will attract and keep business overall. What other marketing or advertising do you plan to do besides just opening the doors on a busy street and seeing what happens?

[SouthernVelvetCafe]

Passing traffic cannot be your only plan. You need to add info about how you will attract and keep business overall. What other marketing or advertising do you plan to do besides just opening the doors on a busy street and seeing what happens?

I feel I must've been unclear. My marketing strategies, though still developing inside my head, are certainly not to just open the doors and hope people pop in. I was choosing to use the traffic count percentage as the number of people passing by that I could attract in through various print, media, web, and word of mouth advertising.
But I wasn't really asking about how to market. I was asking more how I build my sales projections for my business plan. I'm trying to do a first things first approach to this stuff so I don't just skip to the fun parts and gloss over the important but boring ones.

[SouthernVelvetCafe]

If you're just starting out, Starbucks wouldn't be a good comparison since they are a nationally recognized brand. A lot of their traffic will come from people that do the same thing I do while traveling: check Google Maps for the nearest Starbucks when wanting coffee.

I absolutely agree. But the one local place is still so new itself (and I think they're not doing a great job) that I don't feel the info I can get from them is all that useful, especially considering I'm not even staying in the state to start this business! But I don't want to spend the next eight months just waiting for my move to start this work.

[Harold Mansfield]

But I wasn't really asking about how to market. I was asking more how I build my sales projections for my business plan. I'm trying to do a first things first approach to this stuff so I don't just skip to the fun parts and gloss over the important but boring ones.

Your sales projections have no realistic meaning if you can't demonstrate a plan to reach those projections. So it goes hand and hand. Whether you're putting together a plan for your own guidance of for investors, you need specifics about your marketing plan and budget. "Word of mouth" isn't a plan. It's the results of one.

Even if you just say that you plan in spending $1500 a month on both online and offline marketing, it's at least a direction with a plan that let's people know you understand that you will need to do some kind of advertising to get the word out.

[David Hunter]

How'd you come up with the 1%? Did you just pick a random number?

Heck, in real estate I would get a 0.10% (and sometimes lower) response and still make a huge ROI.

Just make sure once you start getting traffic into your business you start colleting contact info so you can market to them directly! It's cheaper to keep existing customers than to find new customers.

[SouthernVelvetCafe]

How'd you come up with the 1%? Did you just pick a random number?

Heck, in real estate I would get a 0.10% (and sometimes lower) response and still make a huge ROI.


Yeah, I really did just pick that number. I couldn't find any kind of information saying how to go from a traffic count to any other number. If it's such a useless number, why do they make a big deal of it? Is it just real estate marketing?

[SouthernVelvetCafe]

How'd you come up with the 1%? Did you just pick a random number?

Heck, in real estate I would get a 0.10% (and sometimes lower) response and still make a huge ROI.


Yeah, I really did just pick that number. I couldn't find any kind of information saying how to go from a traffic count to any other number. If it's such a useless number, why do they make a big deal of it? Is it just real estate marketing?

[Harold Mansfield]

Yeah, I really did just pick that number. I couldn't find any kind of information saying how to go from a traffic count to any other number. If it's such a useless number, why do they make a big deal of it? Is it just real estate marketing?

Of course it is. It's also important to know if you plan on opening a business there. But it's no indication of how much business you'll do or if any of that foot traffic will even care that you're open. You said there are no comparables, so you really can't justify your assumptions.

If you're opening a food stand or kiosk in a mall or tourist area, foot traffic is likely your only source of business. If that's the case then you definitely want to include it.

Look, most projections are completely BS. They're a lot of hope and if's..."If we can just get this percentage of that market, we'll make this much". But you have to make the attempt to demonstrate the HOW in a way that's realistic.

Years ago I worked at a Restaurant that was in a prime location right on the corner of Fremont Street and Las Vegas blvd. Awesome building. Largest collection of actual race cars and memorabilia that I've ever seen. Even the ceiling fans were actual Formula One cars. Foot traffic in the thousands per hour. Yet they struggled. They tried everything from tables on the sidewalk to sponsoring events. None of it worked. They still ended up closing.

So, I mention it to say that foot traffic past the front door is no guarantee of sales. You still have to know your target market, understand your location, how to work the area that you're in. And to do that you have to have a plan.