The number of variables involved in a product launch makes it incredibly difficult to accurately predict the inventory you'll need.

One unexpected twist--like Megan Markle touting your product--and you could be sold out within hours. Your best bet is to leverage any historical sales data you have at your disposal. If you have none to guide you, then you'll need to use a combination of educated guesswork and market research.

Here's how to find the sweet spot when it comes to establishing sales projections:

1. Set a target sales volume.

The way you go about estimating your sales volume will largely depend on the data you have on hand.

If you don't have any data yet, you'll have to find research on market figures and trends in your space. Luckily, there are plenty of companies that specialize in collecting data on certain product categories and industries. Just keep in mind that you'll also need to combine the research with your customer demographics data to truly understand how your product may fare within the market.

If you do have data, put it to work. For instance, when we were launching our extended sizes at ThirdLove, we set the sales volume based on previous data from similar styles and size combinations. We were able to accurately predict that our fashion style bras would initially outsell our basic styles. What we didn't accurately predict was the margin by which fashion would outsell basic.

Even with prior data, there's no way to make the perfect prediction.

2. Choose a route for your expectations.

There are two ways to approach your sales expectations--underestimate or overestimate.

If you take the more conservative approach, you purchase the minimum amount of inventory for your product launch. There are a few advantages to this strategy:

  • You can use the money you save on inventory in other areas of your business, like marketing.

  • You don't risk having extreme amounts of excess inventory.

  • If you do sell out, which is quite possible, it can create a sense of urgency in your customer base that you can use for viral marketing. "This is the shoe/bra/watch everyone is scrambling to get their hands on."

Your second option is to order more inventory than you predict needing. The benefit here is obvious--if people love your product, you can sell more and make more money before you have to put in another order. And you don't risk a customer going somewhere else to buy the product before you're back in stock.

For a new company, I generally recommend a conservative approach--but it also depends on the "expiration date" of your inventory. If what you're selling may be obsolete or out of style in six months, then it's not a good idea to order more than you truly can sell. But if your product is evergreen, it's not as risky to place a larger order.

3. No matter your choice, don't overreact once the product launches.

Even if the first few weeks of sales aren't going according to plan, wait before taking any drastic measures.

Keep in mind that the patterns your product develops early on won't hold true forever. There could be pockets of pent-up demand that initially skyrocket your sales, and once that demand cools off, you'd have a very different sales volume.

You may also need to do customer research about your marketing messages and make sure they're clear and resonate with your audience. One interesting learning we've had is that the choice of color names can really impact sales (i.e. mocha vs. chocolate). If a product isn't selling as well as you had projected, think about how you may better communicate its value.

Even if the initial data support a certain conclusion, wait until a few months have passed and your sales have settled into a regular cadence before making any big inventory decisions.

4. Constantly analyze and adjust your expectations.

Our planning and inventory team is always analyzing and adjusting their outlook as the latest data rolls in. The process literally never ends.

If you're not constantly adjusting to the data, you're going to have a difficult time with your projections. You may end up over-ordering and missing an opportunity to use that money elsewhere. Or you're going to consistently under-order, and your customers may begin to feel as though they're getting a poor experience.

There is no magic solution for ordering the perfect amount of inventory, but if you work with the data you have and set realistic expectations, you'll put yourself in the best possible position for hitting your sales target.

Published on: Apr 18, 2019
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.