PAGE 40 / 87

Unit 2: Marketing Opportunities and Strategies for Sustainable Farm/Ranch Businesses

Topic 5: Sales Potential

At this point, perhaps after having spent months researching new opportunities, customer preferences, competition and distribution alternatives, a farmer or rancher should be ready to develop sales projections using the information they gathered. If they are producing a bulk commodity, then this task is pretty straightforward. If the farmer is planning to market a product that is different or unique in some way – through processing, variety selection, production practices, or labeling – estimating sales potential becomes a more challenging, but critically important task.

Sales potential is simply calculated as follows:

(a) = Potential number of customers
(b) = Estimated purchase volume per customer

(a) x (b) = Potential sales (in volume units)

Example for annual farmers market sales:
Number of customers = 300
Estimated average purchase volume per customer = 60 lbs
300 x 60 lbs = 18,000 lbs potential sales

You can see how it might be difficult to determine the potential number of customers or the estimated purchase volume per customer. A few research tools can help, including household surveys, focus groups and annually published demographic data.