How to Make Sales Forecasting Easy

This article is brought to you courtesy of Spotcap.

Let’s imagine that your business experiences a 10% rise in customer orders in the upcoming three months. If you haven’t had enough time to prepare, you might not be able to respond appropriately to the increase in demand and run into challenges with managing your work or cash flow.

How do you avoid this type of scenario? By buying time through a sales forecast.

Sales forecasts can have a significant impact on your company’s success. They allow you to predict upcoming changes early enough for you to be able to make the necessary adjustments. While the term may sound intimidating, it isn’t necessarily so - at its core, projecting the future of your business relies on finding repetitive patterns from its performance in the past. Here are three small tips that make the task easier to tackle.

Evaluate your past performance

The first step you need to take is to look at your previous figures. Dive into your accounting records and try to work with numbers that go as far back as possible.

This step is meant to improve your understanding of the ways your sales figures changed across the quarters and what that means for your business. If sales have steadily been growing, then it might be time to consider the need for extra staff or inventory.

Another benefit of evaluating your past performance is discovering seasonal changes. Look for any spikes and drops, especially if they repeat over the years - this can be caused by seasonal factors which you should incorporate in your future plans. Knowing when and why they happen will allow you to strategically adjust. A few helpful questions you may want to ask yourself are:

• How were my sales numbers changing - were they growing / decreasing / fluctuating / staying the same?

• Are there any particular periods of time that show higher / lower numbers?

• Do these changes repeat over the years and what might be causing them?

If you’re working with large amounts of data, visualising the numbers can make it easier to find the patterns you’re searching for. You don’t necessarily need to purchase expensive software for the task, since programs that you most likely already have can get the job done - have a look at how we built a sales forecast template through Excel.

Consider your future prospects

Once you’ve examined your sales’ past performance, you’ve done half of the equation. The next step is to look forward and identify any promising leads. Are there any orders or deals currently being negotiated that you haven’t included in your data? Is there an opportunity that you have been working towards, which can give your business a boost?

While we would not recommend relying too strongly on promises which aren’t set in stone, you shouldn’t entirely ignore them either. Keeping them in mind when you do your sales forecast adds that extra layer of strategic information when you approach major financial decisions.

Be prepared to make adjustments

Keep in mind that a sales forecast can’t give you an exact snapshot into the future. Data will rarely be 100% accurate, but you can turn this to your advantage. For example, if you notice that you’re considerably falling behind on your targets, this can act as a trigger for you to stop and assess the situation.

While researching the reasons for this development, you might be able to discover changes in consumer behavior driven by the appearance of new trends in your industry, or a competitor launching an aggressive marketing campaign that is diverting their attention. Having a sales forecast in this scenario gives you the guide to refer back to and discover these signals.

Overall, use your sales forecast not as the ultimate prediction tool, but rather as a means to evaluate your performance. Take notes of any differences when the numbers don’t match. Did you struggle to meet your targets? Or, vice versa, did you surpass them? Aim to understand the reason behind these developments. With both positive and negative outcomes, ask yourself why it happened. Once you know the ‘why’, you can take measures to either avoid it or make it happen again.