Developing a sales forecast is an essential part of any business. Having an understanding of how well a business will do over a given period of time allows business owners to get a better idea of which areas of the business need more resources.
For example, if it is going to be an extremely busy period then owners may consider hiring more staff in production or during less busy periods then they can spend their time on product development or marketing.
It may seem impossible for some business owners to attempt to 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 how to develop 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 you have access to to run a sales forecast is historical data. Sales figures from the past few years will give you a good indication of how the business will perform during a given quarter.
Historical data should give you an indication of how many new customers you are likely to acquire and how many you will leave. This in turn will fuel the amount of marketing and sales activities you will do to win new business.
You should look to break down historical data into customers and product lines, to understand which customers bought which products and how many of each were sold. By focusing on more profitable product lines, this will allow you to generate more income with the same amount of effort.
Sales Forecast for New Businesses
If you’re starting a new business, forecasting sales can be a bit more difficult since you don’t have access to historical data. However, you can look at the following to try to estimate sales figures for a given period:
• Analysis of competitor sales data (if available)
• Carry out market studies
• Seasonal trends in the market it operates
All of this data will give you a good indication of the likely sales figures you can achieve in a quarter. It is important that you make conservative estimates on business growth, as overestimating could cost you later.
Be consistent with the forecasting method you use
Finally, it is important that once you develop a method for forecasting sales, you are consistent in how you forecast the future. If you change the method each time, you will likely end up with unreliable data. Using a consistent model will help you cope with demand and allow you to take action when things go wrong.