Developing a sales forecast is an essential part of any business. Having an understanding of how well a business is going to do in a given time frame enables business owners a better insight into what areas of the business need more resources.
For example, if it’s going to be an extremely busy period, then owners can consider taking on more staff in production or for less busy periods, then they can invest their time in product development or marketing.
It may seem impossible for some business owners to try develop a sales forecast, however, without one it can be very difficult for managers and business owners to predict what resources will be required and where. Here are some tips on developing a forecast for new and established businesses.
Use Historical Data and Past Sales Numbers
If you operate an established sales business, then the best data that you have access to in order to run a sales forecast is historical data. The sales figures for over the last few years will provide you with a good indication of how the business is going to perform over a given quarter.
Historical data should give you an indication of how many new customers you are likely to acquire and how many will drop off. This will in turn feed into how much marketing and sales activities you will to do in order to win new business.
You should look to break down historical data into customers and product lines, to understand which customers bought what products and how many of each were sold. By focusing on more profit product lines this will enable you to generate more revenue with the same amount of effort.
Sales Forecasting for New Businesses
If you are starting a new business, then sales forecasting can be a bit more difficult, as you do not have access to historical data. However, you can analyse the following in order to try and estimate sales figures for a given period:
• Analyse competitor sales data (If its available)
• Carry out market research
• Seasonal trends in the market you operate
All of this data will give you a good indication of the likely sales figures you can achieve in a quarter. It’s important that you make conservative estimates about the growth of the business, as overestimating could cost you down the line.
Be Consistent with The Forecasting Method You Use
Finally, it’s important that once you develop a method for forecasting sales, that you are consistent in how you forecast in the future. If you change the method each time, it is likely that you will end up with unreliable data. Using a consistent model will assist you in coping with demand and enable you to take steps when things are going wrong.