Letters of Intent Can Strengthen Your Sales Forecast

By Dan Boudreau

Predicting the future can be a tough job. And yet that is exactly what anyone starting a business must do when forecasting the products and services they will sell once in business.

One way to strengthen a sales forecast is to get promises from potential customers. The more promises and the stronger, the more reliable the forecast will be. Written promises are stronger than verbal. Letters of intent are written statements provided by individuals and organizations affirming their intention to buy your goods.

Signed contracts are the most reliable confirmation of demand for your goods, but when it’s not possible to secure contracts, letters of intent are the next best way to add strength to your sales estimates. Letters of intent from credible customers will help you build your business case.

Here are a few guidelines for letters of intent:

1. Recognize that letters of intent are not suitable for all types of businesses. Most of the people you’ll attempt to get letters from will be busy. The letter of intent signed purely to get you out of a busy person’s office will not help your case at all.
2. In doing market research, your surveys will enable you to determine the prospect’s level of interest and enable you to build the relationship needed to get a signed letter.
3. Letters of intent are strongest if they are written on business letterhead, signed, dated and current.
4. They must come from a decision maker, owner or person with the authority to honour promises made.
5. They will be weaker if general or vague, stronger if more specific. It will help your business case if the writer states he will purchase an approximate amount of goods within a specific time period. Vaguely written letters of intent don’t give lenders the confidence needed to finance business deals.
6. You will make it easier for your prospects if you provide a sample letter of intent for them to adapt.

Some challenges to consider before using letters of intent:

• They are not a firm commitment to purchase goods, only an indication of intent.
• They are not ideal or even suitable for all businesses or situations.
• Busy people might sign them just to get you off their desk. Even after getting letters of intent, discretion is needed to assess how reliable they are.
• Of course any letters of intent from friends or family are misleading at best. No matter how earnest and sincere, that letter promising over-the-top sales from your mom should probably be left out of your sales projections.

In spite of the challenges, letters of intent offer these benefits:

• They motivate you to get out talking with people and marketing your business.
• They’ll help qualify potential customers and get you closer to making sales.
• They add strength and credibility to your sales forecasts and your business case.
• They can open the door to new information, ideas and opportunities.

Those seeking letters of intent walk a narrow, slippery path. A passive approach will not get the desired results, and yet, being aggressive can come off as too pushy and annoy and lose potential customers. However, if obtained with the right amount of care and sensitivity, letters of intent can make your sales forecasts more credible, and they can lead to real sales once you’ve started your business.

You are welcome to publish this article providing you attach this statement with the link back to the RiskBuster website:

“Dan Boudreau is President and CEO of Macrolink Action Plans Inc and the RiskBuster Business Plan Oasis at http://www.riskbuster.com Writing your own business plan can be easy, fast and fun! Instantly download a free copy of Dan’s popular fast-track business plan template, The Shell, when you subscribe to the RiskBuster Oasis Insider at http://www.riskbuster.com”

 

 

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