Worrying about how to forecast sales for your business? Don’t panic - read our top tips on how to create yours now.
Has your accountant been pestering you about business forecasting recently? Did you start to panic that you don’t know how to do a sales forecast? Your accountant is right – knowing your projected business figures can provide you with untold freedom and security. It’s not as hard as it looks either! So, don’t be scared by confusing spreadsheets – start by reading our top tips on how to do a business forecast.
Hang on: What is business forecasting?
Let’s start at the beginning! To put it simply, business forecasting is the process of estimating figures such as sales, expenditure, and profit within your business. By breaking down and predicting these elements, you will have greater control to make better, more informed business decisions.
What is a sales forecast?
Sales forecast figures are a prediction of your future sales over a set period. So, whether you have one salesman or a whole team of field sales executives, you should be able to predict, to some extent, the value of sales each of them will be bringing into the business.
What is revenue forecasting?
Revenue is the total incoming figure of sales, investments, and credit for your business. For many companies who don’t have other investments, revenue is often a direct reflection of the sales. Therefore, predicting revenue is the same process as forecasting sales.
That makes sense: But why do we forecast sales?
If you can predict incoming sales over a number of months, it means that you can make more intelligent decisions to enhance your sales process. With sales forecasting insight, you can create more informed strategies for managing your workforce, cash flow, and resources. Business growth is often measured by forecasts against actual sales and can be a powerful tool for the development of your company.
Sales forecasting isn’t a perfect tool! We know you are human and you can’t actually see into the future. Instead, forecasting should be flexible and given allowance to develop as more sales data streams in.
Okay I’m convinced: Tell me how to forecast sales
We have some tips and tricks for how to forecast sales growth and make those figures a hell of a lot easier to understand! So take a read below and think about how you can start to implement them in your own business.
Match up the figures
Make sure that when you are creating your forecasting plans, that they match how you measure actual sales. This will simplify the spreadsheets and allow you to identify direct correlations or gaps, quickly and efficiently. For example, if you review your sales quarterly for each team of sales execs, ensure your forecast data also reflects this!
Develop Key Sales Projections
If your main business measurement is in units, then project using units per sale. Some companies do not use units, so you can create the right type of measurement marker that suits your business. For example, if you are a toy shop, you would measure toys sold per month. Perhaps if you are a service provider like a consultant, then you may measure days of work per month instead. This will be the key sales projection, so make sure it’s one of the most valuable pieces of data you have.
Harness Past Sales Data
Already have some sales insight? This is the most powerful data you can hold, and means you are already on your way to understanding how to make a sales forecast. Knowing what your sales have already been will give you the perfect foundations to build from. If you are scaling up, then you may be able to predict a higher influx of sales from the previous month’s data.
Understand Sales Factors
Okay, we know you can’t predict the future, but you can make an educated guess! By understanding factors that will influence your sales, you can more accurately predict them. So, let’s say you develop websites. You know that certain websites may outsell others because they have sought after features. If you develop a new site, you can use these factors and sales trends to compare, contrast and more importantly, predict!
Don’t forget prices
Once you’ve developed your unit projections, then do some simple maths to calculate how much this creates in actual sales. If you were to visualize this in a spreadsheet: column one would see forecasted units sold per month, then column two would see the estimated prices of those units. The third column would multiply these two figures, therefore forecasting your sales per month! There you have it – the beginnings of your sales forecast. We told you it was simpler than you’d imagined!
Manage your profit margins
You will certainly want to know exactly how much you are making in profit and how to forecast this too! By calculating your cost of goods (COGS), you can understand how much you are spending per unit and therefore how much you are making per sale. To go back to our website developer, his COGS are pretty low at just 5%, and so he makes 95% profit on each sale. This is likely to be much higher for a business selling physical products, and will vary depending on your product!
Use helpful insight
You know your business and the industry it sits within, so you will be aware of the factors that will have an influence on your sales forecasting. If you find your data isn’t helpful then don’t worry, its flexible. Just go back to the spreadsheets and amend until you feel you’re getting valuable insight that helps you to continue to make intelligent business decisions.
How to forecast sales for a new business
If you want to know how to forecast sales for a new business, you can start by looking at your competitor’s successes and data. By examining other similar products on the market, you can gauge how well your product may sell. You can also gain maret insights from data houses to identify the potential market size for your business and forecast from this. Once you start getting your own data in, you can keep updating these figures and estimate your own sales more accurately.
So, now you know how to forecast sales! You don’t need a Ph.D. in maths to create simple sales forecasts for your business, and they can quickly become one of the most powerful tools for growth. Harness the data and insight you already have and see the impact and freedom you can create for yourself and your teams. Ultimately, growing a business without forecasting is much harder than the actual process of predicting, so start looking at your business figures today!
Want to see how you can access smarter sales intelligence? Then request a free demo of our software today!