Bringing in substantial sales is crucial to maximizing the profitability of your company. But you cannot just head out into the world without any sort of plan and expect to start raking in the big bucks. You need to have a strong sales plan in place if you really hope to bring in any money. There are many facets to a sales plan, such as detailed customer analysis, structured market research, strategic channel diversification, and cost effectiveness methods.
All things considered, solid sales forecasting is one of the most important facets of a sales plan. Sales forecasting looks at what the numbers are, why they are the way they are, and what they should be looking like in the future. You also need to set some sort of standards in place to ultimately understand what your sales numbers are telling you, and sales forecasting helps you to determine those standards.
Here, we will go into what makes an effective sales forecast, so that you will hopefully be able to move one step closer to reaching your optimal sales numbers.
What Is Sales Forecasting?
Simply put, sales forecasting is a way for you to efficiently estimate your business’s future sales. What exactly can these estimations tell you though besides where your sales numbers should be? Depending on how accurate they are, sales forecasts can also assist you in making informed decisions about your company and can offer added insight into both the long-term and short-term performance of your business. They can additionally clue you in on how you should manage your employees as well as your cash flow and additional resources.
From past sales data to market trends, businesses can base their sales forecasts on any number of things, which we will touch on in a little more detail going forward.
Paying Attention To Your Sales History
Your sales history can tell you a lot about what your sales numbers should be looking like at any given time. By looking at past monthly and yearly sales numbers, you will be able to get a strong indication of what sort of sales numbers you should be consistently achieving.
The past two years worth of sales numbers can tell you a lot about your business. But be sure to take certain periods into account when combing through the data. Maybe you experienced a huge jump in sales during one quarter because you released a new product. Or, conversely, maybe sales numbers significantly dropped during a certain because you had to issue a product recall and consumer confidence wavered during that time.
Whatever the case, past sales data can be extremely significant in determining present or future sales numbers, but do not rely on it too heavily when making your sales forecasts.
Paying Attention To Market And Competitor Trends
What happens if you are running a new business? Past sales data will not do you much good if you do not have any to comb through. In this case (and it is a good strategy regardless of whether you are a new company or a more established business), you will want to pay attention to market standards and competitor trends.
What sort of new production or marketing technology is out there? What sort of promotional tools are businesses using? What new products are competitors coming up with? Are there new channels of distribution that companies are taking full advantage of? How about new sales strategies? What are some emerging customer service approaches that customers seem to be responding most positively to?
The answers to all of these questions and more can ultimately determine sales numbers and play an important role in crafting the most optimal sales forecasts, because they look at customers’ motivations behind dealing with certain companies and buying certain products.
When Sales Forecasting, Constant Adjustment Is Crucial
The market is always changing. Your competitors are always changing. Your customers and their habits are always changing. Your sales data, as you grow as a business and achieve different numbers over time, is always changing. With this in mind, constantly adjusting your sales forecasts is paramount.
There are a number of things you should keep in mind when engaging in sales forecasting. You need to stay up-to-date on market trends. When it comes to sales numbers, you need to look five years into the past (if possible) and five years into the future. You have to constantly be crunching the numbers. Consider any and all new strategies. You should always be examining your costs and your profits. It also helps to rely heavily on easy-to-navigate charts and graphs.
All of these things will ultimately come together to help you efficiently forecast your sales, which is essential if you hope to bring in more sales, maximize profits, and grow and develop your business.