The ability to foresee future events is what differentiates elite companies from their competition. Good forecasting will enable you to make predictions based on past data, present data, trend and competitor analysis.
However, the difference between well-executed forecasting and that which will leave your company in dire straits is minimal. Sales is one of the most forecasted areas of all since the ability to accurately predict sales creates a huge organizational advantage.
Though most forecasts are wrong, the ability to evaluate the direction your company is heading will help you to work out how your business is performing.
What’s important is that you can make meaningful assumptions based on the information at your disposal. Sales forecasting can help you keep track of variables such as how many times a product is sold at a certain time of day and map the activities of your consumers. Moreover, there are a few ways you can test your sales forecasting to determine whether you’re getting accurate readings.
Here are a few tips which will help you improve your sales forecasting:
Evaluate Past Data
If you have sufficient previous sales data from your old business plans, you can evaluate it to work out recurring trends and patterns. Last year’s numbers are a great starting point for predicting what will happen the following year, helping you draft your new sales forecast.
Your previous data can be used as a base for assessing factors that could increase sales. You can also evaluate existing trends relevant to your previous sales results or discover new trends that you can use for your current year’s forecast.
In addition, you can also assess new market opportunities, alongside any potential rising demand for your product or service. If so, you can increase your sales forecast to align with your findings. Once you’ve addressed factors that could boost sales, you should then evaluate what could cause sales to drop.
In case of regulation changes affecting your business operations, or if new competition arises you can decrease your sales forecast accordingly. With a forecast in place, you can assess the individual factors that will affect your plan and proactively address them.
Consult an Expert
This is a top consideration if you don’t have a lot of past data to go on. The right expert can leverage years of expertise to produce accurate forecasting. Therefore, this is a great consideration if you’re just starting out or launching a new product or service.
Working with a professional forecaster has many advantages. Such an expert will typically understand the nature of your market and have specific industry experience. Moreover, they will be able to provide key insights on your competitors and carry out extensive industry research.
It’s important to choose the right professional, preferably one who can use first-hand experience to make expert judgments you can trust. You should also consult with front-line staff too, including those who deal with the sales function on an everyday basis.
Focus on Demand, Not Supply
One of the biggest “sins” within business is the inability to fulfill customer orders. This usually occurs when companies fail to account for the demand for products or services offered.
You should always focus on demand and account for supply accordingly. Doing so will avoid you over or underestimating your supply, which can often cause companies to leak money.
Consider the following example. Your forecast to sell 150 products, yet only produce 100 per month. In this case, your forecast will give you time to figure out how you can increase production to meet customer demand.
Hopefully, you will find these forecasting tips useful. Bear these in mind and you’ll be one step closer to predicting the future, or at least to making a trustworthy and informed guess!