The Art of Sales Forecasting


4 Principles of Sales Forecasts

By University Alliance

Your sales strategy, past sales performance and expectations of economic and market changes are parts of effective sales forecasting.

Sales forecasting allows companies to predict future performance. By focusing on sales forecasting, you’re able to plan for coming business demands and have adequate resources in place. Generally speaking, companies that use sales forecasting strategies have higher performance levels than those that don’t.

Existing companies aren’t the only businesses to benefit from sales forecasting ─ entrepreneurs also use this technique to attract investors. This allows prospective investors to better evaluate and assess the company to determine whether financing is a good business opportunity.

Developing an accurate sales forecast can alert you to potential adjustments needed in your supply chain or inventory so you’re prepared for a bump in business or let you adjust ordering if a slump is coming. A forecast can let you shift staffing or provide insight into your cash flow needs.

4 Principles of Sales Forecasts

To obtain the most precise predictions in a sales forecast, it’s important to base predictions on more than just the previous quarter’s numbers. Thoroughly examine these principles of sales forecasts when creating one for your company:

  • Sales Strategy: It’s important to develop a solid sales strategy that will determine steps that need to be taken to continue earning business. This may include actions like examining customer needs and establishing how you rank against the competition. Sometimes a SWOT analysis is helpful to highlight where you stand.
  • The Buyer: Rather than basing your sales forecast solely on what you’ve done in the past, include an examination of what your buyers are doing now. Concentrate on what you can do differently at each stage of the buying process to make the decision to convert easier for customers.
  • Sales History: While you can’t rely entirely on sales history for a forecast, it is an important element. Examine your past sales to determine the most effective ways to tailor your sales pipeline to address important features of your selling process. This will help you better manage your process so you can gauge exactly where you are with each client.
  • Adaptation: Every solid sales forecast must have the flexibility to be updated. Business is constantly changing, so you may need to adjust your forecast to keep up with changes in overall economic conditions or as you gain more data about sales progress.

Sales Forecasting Methods

When it comes to creating the most accurate sales forecasts for your business, there is certainly no one-size-fits-all method. It’s important to take individual factors that make your business unique into consideration when choosing the most appropriate technique. While the actual calculations can be quite simple, making sure you have the most accurate records is vital. Without accurate information, any sales forecast can be skewed. Two common frameworks to begin sales forecasting are:

  • Annual Forecast: Considered the most straightforward sales forecasting method, the annual forecast assumes no major changes to your business and takes only inflation into consideration. It uses this formula to calculate your annual forecast: Last year’s annual sales + (last year’s annual sales X inflation rate) = sales forecast for next year.
  • Monthly Breakdown: If your sales significantly fluctuate by season, break your sales forecast down by month to ensure resources are properly allocated. Determine monthly sales numbers by analyzing sales figures from the past few years to calculate the percentage of annual sales made each month.

These are two basic forecasts but they are only a framework. Detail can come through other factors that you may want to consider.

There could be expectations of changes in your market or forecasts of changing economic conditions for consumers. Weigh the prospect of bringing in new customers during the forecast period as well as the possibility of losing contracts or customers. Changes in political conditions such as an election or new administration could severely impact companies that rely on government contracts. Your competition could weaken or become stronger.

Use sales forecasting to create accurate predictions for your business to ensure you’re fully equipped to meet business demands. Incorporating this important step into your planning process allows you to make specific calculations that your organization can rely on.


Adding to your education through a certificate in advanced professional sales and sales management with courses such as expert selling and expert sales management can help you learn how to direct a sales force and develop the knowledge to reach your peak potential.

 


Since I began the course, my sales have doubled. Without the Internet Marketing program from the University of San Francisco, I would be just another average web consultant working for an average web development firm providing average service to my clients. This course has allowed me to elevate the discussion from web development to full-fledged Internet marketing programs. As a result, my competitors are always in chase mode and can’t figure out why they’re losing their accounts and potential clients.

Chad H. Pollitt
Fort Wayne, IN

 

Category: Sales Management