Sales equals business success right? When starting or running a business it’s imperative to forecast your sales.
Simply, a sales forecast is estimating future sales and the revenue that’ll generate over a certain period of time. Due to sales forecasting; reliable and accurate based sales projections can be predicted and are essential.
Now, to sales forecast, a business should take into account market research they’ve conducted plus look at patterns in sales.
Additionally, the judgement of the business owner is a part of predicting a sales forecast. Uncontrollable factors like environmental and political should be judged.
Considering a marketing plan within sales forecasting is helpful to a business as well. As both plannings are fundamental and to combine them will hopefully help to see projections in both to be corresponding and successful.
What are the main benefits of sales forecasting?
There are a number of benefits sales forecasting provides. As seen to the right ->
One of these benefits is being able to plan for future requirements. A sales forecast helps to predict future sales, so with (hopefully), an increase in sales means an increase in resources. A business can start to prepare for demand in time equalling in less panic stress!
Further, a sales forecast recognises when the business will be going through a busy period and when it might not. Marketing and financial strategies can then be put in place to sub stand these different time periods. Granting a business to be more secure and manageable through different peaks.
It can be a bit different for a start-up business as they have no past records of sales. However, if a business knows what they are going to charge and the pricing of resources etc; they can start to generate an indication of whether the business will be financially viable.
For a running business, your sales forecast should predict any growth and how to accommodate that.
Both a start-up and a running business should be focusing on creating a sales forecast that foresees over the next 12 months at least of their business.
What should you be looking for?
To forecast, they’re several factors a business must look at and ask themselves. It’s essential for the forecast to be in-depth and for the business owner to know they’ve explored every area of the business.
For instance, there is market research, target market, competitor analysis, external factors and capacity.
Market research
Market research, is about understanding whether there is an industry for your business? what influences the market? size of the said market? Is it growing or declining?
Target Market
A target market is a group of potential customers that will buy your product or service; a business should ask themselves such like, do you know who your target audience is?
Knowing your target audience is important, you can make an educated estimate for pricing if you’re knowledgeable on this, ensuring that your target market can afford to purchase your product.
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Competitor analysis
A business must pay attention to competitors, how many competitors and what makes them different? What threats could there be? and what makes your business unique?
External factors
These are elements outside of your business that is uncontrollable. Environmental and political fit under this umbrella.
PESTLE analysis is a key process model to go through to help establish an idea of external factors that could be an issue and how to prepare for them.
Capacity
Simply put can your business stand any dramatic changes in sales, would you be able to keep up with demands and needs for resources?
By exploring each factor, a business can now confidently start to prepare their forecast in accordance with all the subjects above creating a thorough forecast.
Start-up businesses
Now for start-ups, it’s a bit different as they have no previous sales history to base the forecast on. Due to this, a start-up business should conduct research into businesses like theirs for an overall idea of pricing, sales and trends.
So in our case, if EMS was just starting up and needed to conduct research we’d look at similar business consultancy and see the average amount of clients they are taking on and what income is being brought through. This generates an idea of what a business consultancy could produce.
To connect the research and the in-depth planning from looking at the target market and such, a start-up has then produced a sales forecast that has justification and accuracy.
If a business is unique and can’t find secondary market research, they should conduct their own.
For example, if a person wanted to set up a cycling shop. They would need to ask people from around the area questions such as how often do you cycle? do you want to start cycling? On average, how much would you spend on a bike? Etc.
These questions would gather whether the business would be viable in this area and if people would be interested in the business. Provided this information, a bike shop owner can then develop an estimate of sales and have more of an idea of what the target market concludes of.
Up and running businesses
A business that is trading will have real sales from previous months/years to base their sales forecast on. Keeping their planning up-to-date and accurate will support the sales forecast to be able to foresee any growth or decline. It depends on the business itself. However, it doesn’t hurt to review planning!
Some businesses have more than one service or product they sell. If this is the case a sales forecast will have to adapt to several forecasts, to prepare for each product/service by its volume and value.
The volume is the amount sold per month and the value is the total revenue the product/service gains. By combining these both together, it is possible for a business to determine a pricing strategy and can consider what impact this might have on the sales forecast as well as marketing strategies.
By having a glance at each possibility; a business is establishing whether certain factors might significantly raise prices or lower them. Overall checking that everything is achievable and can meet the expectations.
If your someone who wants to learn more our training offers a wide range of expert intelligence that will help guide you.
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Please get in touch if you’d like more information and we will help to guide you in the right direction.
