With restaurants, as with most businesses, there is no single right way to do a sales forecast. The best sales forecast method will vary according to how you manage information, how much past data you have access to, and what special factors drive your business.

With this example, let’s explore one way that one restaurant owner did it, so you can copy this method or use it to inspire your own sales forecast.

## How to make a sales forecast for a restaurant

The best way to explain how to create a sales forecast is to run through an example. We’ll be looking at how Magda forecasts her sales for a café she wants to open in an office park.

She hasn’t contracted the locale yet, but she has a good idea of where she wants to locate it and what size she wants. She also plans to just serve coffee and lunches. With all that in mind, let’s get started on establishing a baseline for her sales forecast.

### 1. Calculate your baseline restaurant capacity

When you’re just starting out, you need to establish a baseline for your daily capacity. This is your estimated sales numbers that will help inform your full forecast.

#### Estimate your daily number of customers

To keep this example simple, Magda is only planning to offer lunches for a 1-hour period and let’s say she has just six tables capable of sitting four people each.

Ideally, all of these tables will be filled during a given lunch hour, so she estimates 24 sit-down lunches on an average day.

Magda also plans to offer to-go lunches, so she can serve more customers. This will be about double the sit down capacity, so 48 per day.

Magda knows that not every customer will purchase beverages with every meal. So to accurately set up her forecast, we’ll need to account for beverages separately. She estimates lunch beverages as .9 beverages for every dine-in lunch and only .5 beverages for every to-go lunch.

Some customers will also be coming in just to have coffee outside of that one-hour lunch period. So, she calculates the coffee capacity as a maximum of one customer every two minutes, or 30 customers per hour. This expected customer flow, with a maximum of 30 coffees is expected to occur during the 8 to 9 a.m. hour.

She also estimates some coffees at lunch, based on three coffees for every 10 lunches. You can see the results here, as a quick worksheet for calculations.

#### Where do those estimates come from?

How does Magda know these numbers? Ideally, she knows because she has experience and is familiar with the café business as a former worker, owner, or close connection. Or perhaps she has a partner, spouse, friend, or even a consultant who can make educated guesses.

And, by the way, there is a lesson here about estimating and educated guesses — Magda calculates 97.2 coffees per day. That’s really 100. Always round your educated guesses. Exact numbers give a false sense of certainty.

### 2. Turn your daily estimates into monthly estimates

Once you have your daily estimated customer base, it’s time to expand that into a monthly estimated capacity. To do this, just multiply each line of units by the total number of workdays per month. You’ll then want to associate the monetary value of each item to get a full picture of your monthly sales.

In Magda’s case, let’s look at the above illustration again. You’ll see that she estimates 22 workdays per month, and multiplies coffees, lunches, and beverages, to generate the estimated unit numbers for a baseline sample month. So that means the base case is about 1,500 lunches, 1,000 beverages, and 2,000 coffees in a given month.

Before she takes the next step, Magda adds up some numbers to see whether she should just abandon her idea. At \$10 per lunch and \$2 per coffee or beverage, that’s roughly \$15,000 in lunches, \$2,000 in lunch beverages, and \$4,000 in coffees in a month. She probably calls that \$20,000 as a rough estimate of true full capacity.

To really see if this is sustainable, she could quickly pull together some rough costs to factor into her sales. Maybe figure on a few thousand in rent and utilities, a few thousand in salaries and inventory, and then decide if she should continue planning. (And that, by the way, in a single paragraph, is a break-even analysis.)

### 3. Adjust expectations for each month

With those rough numbers established as capacity, some logic for what drives sales, and how the new business might gear up, it’s time to look ahead to how you expect each month to perform. Realistically, you won’t hit full capacity every day, every week or every month. You need to make some educated guesses around how quickly your restaurant will grow, seasonality and broader market shifts.

In Magda’s case, she needs to anticipate a slower initial rollout due to being a new business and then make some educated guesses around how seasonal performance may be affected. Here’s the monthly capacity she expects over her first year.

### 4. Calculate month-by-month estimates for the first year

From there, it’s time to outline specific sales for the coming months. To make this easier for you long-term, it may make sense to setup a spreadsheet. While it’s specific to a SaaS business, you can download our free sales forecast template to get started. Or if you want software that does the heavy lifting for you, check out LivePlan.

Going back to Magda’s sales forecast, she inputs the row definitions, unit sales estimates, average prices, and average direct costs to create a complete sales forecast. The first illustration here shows the table results for sales for the first few months. The numbers come from multiplying projected unit sales times projected average price per unit.

These are all based on the calculations we walked through above, with an additional row added for “other,” which is t-shirts and mugs and such.

And this illustration from LivePlan shows the data input for unit sales of lunches, one of the four rows of sales. Compare the ups and downs of these estimated unit sales to the capacity estimates above; you can see, visually, that they are related. No need, however, to go into the details; that might make it seem more scientific than it really is.

#### Forecast with the right level of detail

Notice here that Magda doesn’t try to break lunches down into sandwiches, soup, burgers, ham versus cheese, turkey versus beef, or any of that detail. Too much detail doesn’t work well in the real world. Instead, she summarizes and aggregates enough to make a useful forecast that she can track, review, and revise as needed with the ongoing business.

For your forecast, it likely makes sense to break items down by type, (ie. entrees, appetizers, drinks, deserts, etc.) or by meal category (ie. breakfast, lunch, dinner, drinks, etc.). Separately from your forecast it may be wise to break down your menu further to identify winners and losers. But when you’re looking ahead and estimating sales, this level of detail will only complicate matters and make it difficult to navigate.

### 5. Estimate your direct costs

Along with your sales, it’s advisable to estimate direct costs (also known as cost of goods sold, or unit costs). These are costs that your business incurs only in delivering what it sells.

In Magda’s case, it’s what she pays for the coffee beans, beverages, bread, meat, potatoes, and other ingredients in the food she serves. For a bookstore, it’s what they paid for the books it sells. For a taxi business, it’s the gasoline and routine maintenance.

So, with her unit sales estimates already there, Magda needs only add estimated direct costs per unit to finish the forecast. The math is as simple as it was for the sales, multiplying units by the per-unit direct cost. Here’s the finished example showing direct costs in a table.

If you’re following along, Magda estimated per unit direct costs (not shown here) as 50 percent of the sales price for lunches, 20 percent of the coffees, and 35 percent of drinks.

## Why conduct a forecast for your restaurant?

Forecasting may be the furthest thing from your mind when launchign a restaurant. But like any business it’s an essential component for smart decision making and validating the potential of your idea. Here are just a few of the ways forecasting can better help you manage your new restaurant.

### Inventory management

Under or overordering the necessary product to operate your restaurant can be costly. Having too much can lead to produce and other perishable items going bad and needing to be thrown away. Having too little, may lead to unhappy customers or simply the inability to serve at capacity.

Forecasting can help you better anticipate exactly how much inventory you may need. You can look to past sales data, monthly trends and seasonality to more accurately order the right amount of inventory. Now, keep in mind that especially with restaurants there will be some level of unpredictability, but this should still get you closer to accurate and less costly inventory levels.

### Optimized staffing

There’s nothing worse than being under or overstaffed, in which both cases the potential for lost sales or revenue drastically increases. Looking at your weekly sales can better help you plan out your staffing needs. If you see consistently high sales on Friday evenings, but virtually none on weekday mornings, this can help you plan accordingly.

Similarly, if you look at your seasonal trends and notice a massive uptick in mid-week sales around the holidays, you know to plan for more staffing this coming November. This tells you that you should anticipate higher employee costs to accompany the increase in sales, giving you a more realistic sales outlook.

Set realistic expectations

When starting out, it can be very easy to overestimate the potential of your business. You have great ideas, great food, a well-trained staff, but that doesn’t necessarily equal explosive growth. If you go in expecting big results without planning, you’ll find yourself disappointed and potentially out of business.

Forecasting helps keep things in perspective. It trains you to actively look ahead, compare actual results and adjust accordingly. Eventually, it may make sense to operate multiple forecasts. One that’s more optimistic, one that’s neutral and another that explores worse case scenarios. The more you test, explore and adjust, the better off your business will be.

## Forecasting doesn’t have to be complicated

As you can see forecasting doesn’t have to complicated or scary. It’s a combination of simple math, estimations and logical assumptions. There’s no magic answer, no perfect result, just projections based on actual results. And the best thing is, much of the work you’re doing in planning for your restaurant can be directly applied to your forecast.

Just know that once you build your forecast, that’s not the end. In order for it to actually help you run your business, you’ll want to revisit it on at least a monthly basis. It’s at this time where you review actual performance, look ahead and make adjustments accordingly.

For your restaurant, developing accurate forecasts can help you anticipate future sales, optimize inventory and staffing costs, and hopefully grow your business. It may seem intimidating, but all it takes is walking through a few simple steps.

Editors’ note: This article was originally written in 2019 and updated for 2021.

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.