Running a business means that you need to constantly keep an eye on the evolving state of the market, as well as your competitors and the economy. There is no surer way to lose money and customers than to enter each year blindly, due to a lack of preparation and sale goals.
No one can accurately predict the future, but there are ways that you can make sure you are prepared for various scenarios. A tried and tested method to devise a plan for any challenges that your company may face is to create accurate sales forecasts. Not only will this help you to understand your market and customers, but you can also consider upcoming costs and the products or services that require a special focus.
In this guide, we’ll walk you through the benefits of accurate sales forecasting and the top five things that you should include in your report. Continue reading for our tips and tricks to create a sales forecast that will help your company in each financial year.
What is a sales forecast?
Along with networking and market research, a sales forecast is one of the most important things that you can do to help your company grow and flourish. As the name suggests, these reports are used to forecast sales revenue, which in turn can help you to plan budgets and staff hiring. You can use the forecast to estimate the sales totals of the coming weeks, months and years.
There are different methods that you can use to create a sales forecast for your business. Some companies prefer to use AI technology, whilst other businesses rely upon the sales team and sales reps to manually analyse historical sales data to make future sales predictions.
The data from your sales forecasts can be used to predict the week, month or even year that your sales team expects to meet specific sales revenue. It’s important to create accurate sales forecast reports so that you have a projected measure of how successful your future go-to-market plans will be.
Sales forecasts are different for new companies from the ones that established businesses produce because they don’t have past sales data. To create accurate sales forecasts, a new company would predominately focus on research of their target market, along with an analysis of competitors and the trading area.
Top five things to include in a sales forecast
In order to create a sales forecast, an established company would need to analyse historical data and include different estimates. We have listed five of the things that you should include in your sales forecast to make it as accurate as possible.
Goods and services for sale
One of the main reasons to create a sales forecast is to help you estimate the number of goods or services that you will sell in the future. You need to take stock of what you have and which products or services you hope to successfully sell, along with the estimated time frame of the sales.
A good way to estimate the number of products or services you could sell is to predict the number of customers that you expect to gain in the coming weeks or months. This could be based on a change in the market or a promotional campaign that you are planning.
Quantity that you expect to sell
Estimating the popularity of each product or service can help you create a budget for materials and staff. You can increase the production on certain items if the market is going well for them, whilst holding back on less popular items. This will help prevent a surplus of stock, which could end up costing you money.
Historical data is a good source to draw on to help you make a reasonable estimate of the number of goods or services that you can sell in a set period of time. You will need to have a decent amount of stock to ensure that your customers’ needs are met and delivered in a reasonable time frame. A low quantity of products could negatively impact your relationship with your customers, which could lead to a breakdown of trust if they are left waiting.
You need to know the driving force behind your customers’ actions in order to predict their future actions. Why are they turning to you for a new service or product? This question can be answered by a number of factors, such as any future promotions that you might organise. A successful campaign can have a big impact on the sales trends for your company, which is why it’s important that you consider it in your sales forecast estimates.
Anticipating market trends is essential to the growth of your company. You will need to consider any acquisitions you may get, along with upcoming market events, such as changing legislation that could affect the sale of your products.
Keeping an eye on the market will help you to predict the sales performance of your products and services. You can use the estimated growth or decline of the market to help you adjust your production and output. Analysing the average sales cycle of your products means that you can use the previous lifespan of the sales opportunity to estimate how likely you will have a successful deal.
Sales cycle forecasting relies upon accurate data so that you have suitable labour and materials for the production of your items and services. As the average sales forecast should be produced around 12 months in advance, you will need to be ahead of the curve in estimating how the current economy and market will affect the future of your company and products.
Estimate cost of production
Along with estimating the number of products or services that you expect to deliver, you will also need to take the cost into consideration. This could involve estimating the cost of materials from your suppliers to see whether you will need to pay more in the changing climate. You should also take the cost of labour into consideration, along with the cost of the building you are working from.
You can observe the prices set by your competitors and see whether you need to adapt your production costs if you want to be competitively priced. These estimates can help you to predict your company’s expansion, based on the profit that you could be making.
Solutions to potential incidents
The one thing you need to acknowledge during your forecasting process is that the sales forecast accuracy will never be completely guaranteed. There is no way to know how the market will change and grow, so it’s your responsibility to prepare for various scenarios and adapt as and when it’s needed.
Some forecasting software can help you forecast the outcome of the sales process by updating your predictions based on evolving data. This can help you to adjust your business plan for the coming year and make any necessary changes to production quantities, costs or promotions.