Paint by Numbers – Using Numbers to Paint Your Sales Forecast
Sales forecasting is such an important part of business planning. What exactly is sales forecasting? It is a prediction/forecast of sales based on past sales performances and an analysis of future market conditions.
Most businesses perform some sort of forecasting to predict how their business will grow and how they should direct marketing efforts in the future.
Established businesses can use past sales figures to predict the upcoming seasons or annual sales. If an owner is in the market for a new venture, they can use sales forecasting as a key element to their business plan.
Business owners will need to determine how sales are calculated for their industry. For example, medical professionals are paid by billable hours, while restaurants and retailers are based on sales per square foot. Here are a few benefits to businesses to using sales forecasting:
- Business Trends
- ROI-Return on Investment
- Annual Sales
When predicting future sales, take into consideration external factors that can affect sales outcome:
- Economy – In tough times, gear your product or service to a need compared to want.
- Weather – Unforeseen weather conditions affect all buying.
- Seasons – The retail industry typically has better sales after the Labor Day holiday.
- Competitors – If the competition is offering an outstanding product at a great price-this will affect future sales.
The Small Business Administration can assist businesses with research. One calculator to use might be: number of customer’s x frequency of purchases x dollar amount of the sale. Calculate all numbers to project yearly sales for the target market.
Any future sales predictions should be based on research and data rather than guesses. Performing a sales forecast will provide businesses with an analysis of prior and present sales as well as provide a comparison to industry averages.
Sales forecasting is an assessment tool for businesses. The direction of any company may rest fully on the accuracy of the sales forecast. Use all available resources for accurate predictions.