Many businesses already have a solid system of sales forecasting in place as part of their business strategy. But most of sales forecasts are still created using only historical data and any new predictions for the future sales are often just some numbers managers pulled out of the hat. This leads to sales forecasts being one of the most inaccurate business predictions.
Decision makers struggle to create sales forecasts that provide an accurate depiction of reality but still encourage growth. With the possibility of higher profits, no one wants to have an under-delivered strategy.
But sales forecasts have much more to offer than just some numbers for the future. Sales forecasts help businesses underpin growth and profit and are crucial for determining recourse and supply allocation while establishing a strategy for sales and associated costs. But none of that matters if they are inaccurate.
Many businesses benefit from improved accuracy of all of their predictions, sales forecasting including as it can prove future prospects of the company. While avoiding some of more obvious sales forecasting pitfalls, here are some sales forecasting hacks to use:
Only feasible opportunities
It is very common for businesses to get trapped in sales forecasts that determine the level of sales they need for the business to be viable, then putting this figure in a forecast. And while ideal, this is obviously not a feasible measure of future success. This then, unfortunately, leads many down the path of forecasting all opportunities and it’s really easy to get lost among the mass of data and take every opportunity at its face value, but the reality is far from it.
The best forecasts are based on real opportunities. And the best way to achieve this is by looking at every opportunity in a projection, whether it is a new sales channel or a new platform, and ask yourself Is this the REAL deal? If there are logical next steps to accomplishing this opportunity or is this just a speculation? Otherwise, these predicted opportunities might be sabotaging your business by occupying your sales teams with herding the cats.
Set regular forecasting sessions
We check weather forecasts everyday, but set business predictions once a year, and never review. Monthly forecasts are excellent tools for businesses to predict potential influence of the coming seasonality, market changes and ensure sufficient revenue. Monthly forecasts are excellent for keeping business on track and making sure that they are heading in the right direction.
This is particularly important in a current volatile environment, where new competitors are emerging everyday, globalisation is expanding the market competition and political environment is unpredictable. Rolling forecasts help businesses anticipate the risks and opportunities presented by a dynamic business environment, revisit strategy in the light of new business scenarios and align resources/activities for competitive advantage.
Weed out bias
It is crucial to record your business KPIs in order to measure your business performance. However, having a single goal in mind, it is often tempting to report on the goal associated data and ignore everything else. For example, reporting on a business growth and profit margins, many tend to ignore the values associated with that, that might be just as crucial. Growth in profits might mean success, but at what cost is this achieved? And can you increase your profits by minimizing the cost that was required to achieve it? Can you optimise other avenues that your business generates revenue from?
So, to protect your business from a lopsided data, use a variety of different data set and incorporate your teams’ point of view as well. Additionally, do not steer to far in the other direction, where the involvement of more data sets becomes contradictory on your own reports. Use this opportunity to steer the group toward maximising the value of the forecast for the organisation.
No one is perfect!
While unfortunately, not every sales forecast will become the pinnacle of accuracy, don’t just brush them under the rug and ignore forecasting forever. It is crucial that you learn from what when wrong in your forecasts and where you could improve. Perhaps business did better than projected, did you completely ignore your goals, has business faced some challenges you didn’t predict, and why?