An accurate sales forecast will help your business make better decisions. When you have a sales forecast locked down, you can use it for overall business planning, predicting budgeting and resource allocation with precision. You can even plan for growth or where to scale down, saving money and ensuring your time and hard earned cash is invested in the right places.
A good sales forecast involves less second guessing. It will effectively predict what your expected profit will be per quarter which will give you a much clearer picture of what your business health will be at various points in the year and so when to spend and when to pull back. To put it in a nutshell, a sales forecast is a crucial tool any business owner should use to make decisions that directly impact the growth of their business.
And the more insightful information you have to funnel into your forecasting the better equipped you will be to plan for business scenarios throughout the year. This will create much more informed decision making across your business, including where to invest those resources.
A risky business
All business involves risk, but that doesn’t mean that you can just blunder around in the dark hoping you won’t step on the thousands of pins lying around. A carefully constructed sales forecast can be the difference between finding the light switch and looking like a pin cushion.
Mitigating risk is one of the crucial ways a business can avoid time wasting, cost drains and missed opportunities. Sales forecasts help sales teams identify the early warning signs in their sales pipelines and gives them enough time to correct it before its too late.
The biggest risk to a business is arguable losing money. Sales forecasting helps business estimate their costs and revenue accurately which helps to predict short-term and long- term performance. The forecasting then directly informs financial planning which filters down into project teams and eventually to your profit margins.
Get with the programme
And the beauty of a sales forecast is that it can be modified according to changes in the market or even a business.
External and internal factors affect a sales forecast. It makes zero sense to do a sales forecast once a year and then pray nothing changes along the way. Businesses aren’t an act of faith, they involve careful calculation and analysis. Thy also evolve according to internal shifts and the external market, which is a constantly changing beast. Not adapting a sales forecast regularly is the equivalent of looking at a TV manual for setting up a washing machine. The business landscape has changed and so must your forecasting. The recent pandemic is a good example, if a sales forecast was done in January 2020 and then was not updated from April 2020, it is the business equivalent of sticking your head in the sand and hoping things will just work out. Business is about adapting at exactly the right moment, and a sales forecast is the tool that gets you there.
It’s also important to create different sales forecasting scenarios. Forecasting can be fairly accurate but it isn’t a crystal ball. It’s always wise not to overly rely on one assumption. Understand what is going on in the market and in your business and create more than one forecasting scenario. The next step is to qualify it based on how likely it is going to happen so you understand what your main forecast is while keeping an ear out for the more worrying or best case scenarios. This means you don’t just have a plan B but also a C,D,E and F.
Smells like team spirit
A successful sales team is a happy team. An accurate sales forecast will lead to better planning, decisions and sales processes and will avoid having your team flounder without any guiding force.
A business without a sales forecast is more likely to overpromise on budgets, have unexpected project delays, change a decision halfway through a project and increase pressure to generate unrealistic revenue or objectives. Your sales team wants to know they are adding value especially when they are so results focused. Nothing is more frustrating than wanting to reach a sales goal but complicated process and misaligned objectives are stopping you from reaching your quota. This then leads to general dissatisfaction, de-motivation and worst case scenario your valued team members start searching for greener pastures. Giving your teams the tools to succeed not only improves morale it also rockets overall productivity and sales revenue.
In the end, sales forecasting is a sure fire way to take some control back, can bring lasting positive impact and will help your company stay resilient to the every-changing variables just around the corner.
Visit our blog to learn more about what steps should be part of your standardised sales processes or why your sales team should be more data-driven. For more information on how to streamline your sales processes take a look at our sales accelerator tool.