Profitable Times Newsletter

Forecasting Revenue

The first step is to gather information to be used for the forecast. Most importantly this includes visitation estimates, ideally provided by museum management based on past visitation adjusted for changes in, and the strength of, the exhibit and special event schedule. Additional factors can include general visitation trends, marketing plans and anything else affecting the awareness of the museum by the public.

The ideal visitation projection should be generated by museum management because it may include factors about which you are not aware and it puts everyone in the museum, including other earned revenue sources such as foodservice, on the same page.

You should also consider destination store customers (if any), customers driven to the store by ecommerce and mail order catalog activity, when the store is open during rental events and other factors not directly associated with 'visitation'.

If museum management does not provide a visitation projection you will have to calculate one yourself based on as many of the factors listed above as you can. If you generate a visitation projection, make sure to keep detailed records of objective and subjective information used to prepare the estimate because you may be subject to second-guessing of this core data.

It is best if several revenue matrixes are prepared using different input with each of them bracketed for a range of results. The bracketing may include a best-case scenario, worst-case scenario and a third in between and possibly described as most likely. The more thorough you are in breaking down your projections the more accurately you can forecast revenue.

Some of the historical data helpful for these projections include:

  • Revenue per Visitor (Net Sales ÷ Visitors)
  • Average Transaction (Net Sales ÷ Transactions including a retail item)
  • Revenue per Square Foot (Net Sales ÷ Square feet of retail selling space)

Three projection matrixes, using data appropriate for your museum, might look like this:

  Store Revenue Based on Number of Visitors and Net Sales Per Visitor  
Sales per Visitor
Visitors $2.50 $3.00 $3.50 $4.00 $4.50

 50,000 $125,000 $150,000 $175,000 $200,000 $225,000
 75,000 $187,500 $225,000 $262,500 $300,000 $337,500
100,000 $250,000 $300,000 $350,000 $400,000 $450,000
125,000 $312,500 $375,000 $437,500 $500,000 $562,500

Projected Revenue
  Store Revenue Based on Number of Transactions and Net Average Transaction  
Number of Average Transaction
Transactions $15.00 $20.00 25.00 $30.00 $35.00

10,000 $150,000 $200,000 $250,000 $300,000 $350,000
15,000 $225,000 $300,000 $375,000 $450,000 $525,000
20,000 $300,000 $400,000 $500,000 $600,000 $700,000
25,000 $375,000 $500,000 $625,000 $750,000 $875,000

Projected Revenue
  Store Revenue Based on Dollars per Square Foot  
  Square Feet (Area to which customers have access plus cash-wrap)  
  $/Square Foot   1,000 1,100 1,200 1,300 1,400

$250 $250,000 $275,000 $300,000 $325,000 $350,000
$300 $300,000 $330,000 $360,000 $390,000 $420,000
$350 $350,000 $385,000 $420,000 $455,000 $490,000
$400 $400,000 $440,000 $480,000 $520,000 $560,000
$450 $450,000 $495,000 $540,000 $585,000 $630,000

Projected Revenue

Not only can each of these matrixes be bracketed for best, worse and most- likely scenarios, but where they overlap each other may be a strong indicator of probable revenue.

You can also use similar matrixes for separate special exhibit, satellite, pop-up store and other retail venues. The forecast could also include projections broken down to reflect changes in different product categories such as increased sales of proprietary product because of 3-D printing, declining book sales because of internet competition, continued strength in jewelry sales, etc.

A subjective area that is difficult to forecast is the impact of improved customer service and pro-active selling on revenue. Your past efforts are reflected in historical numbers but concentrated or renewed staff training can result in significant revenue improvement. Alternatively, you could dedicate yourself to improving these areas and treat the resulting incremental revenue as a pleasant surprise.

If you are going to focus on customer experience improvements that you think will lead to increased revenue it may be most effective to break down the effort into distinct and quantifiable segments while remembering small improvements over time and hundreds of transactions can lead to significant results. For example, if the historical number of items per transaction has been 2.3, setting a goal of 3.0 and providing training on add-on selling techniques (along with add-on displays in the store) can (will) result in additional revenue. The beauty of this type of incremental improvement goal is that it is uncomplicated, easily applied, simple to track and can result in tangible results for which the salesperson can take responsibility and pride. Similarly, although somewhat more complicated, the goal can be an increase in the average transaction.

Ecommerce, catalog, school group goodie bag sales and other sources of revenue also need to be forecasted. It is recommended they each be calculated separately, then amalgamated into an overall revenue projection.

To be most valuable to the museum you need to be true to yourself and straightforward with museum management. If you believe and can substantiate that revenue will be less for whatever reasons, it's best to make that opinion and the supporting documentation known as early in the budgeting process as possible.

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