A business’ sales team is crucial to the company’s survival. Without it, there won’t be any products or services to offer and no income. Thus, it needs to ensure the company’s growth.
For company management to accurately project its sales for the next few months, it would need to use past sales data to compare it to the current market conditions. After that, it needs to factor in the performance figures of the team and do more research on the latest technology and clients’ needs.
Moreover, the company needs to package all of these into one vital information, which will become the sales forecast. Companies with large quantities of monthly sales will need revenue forecast software to wade through the masses of data and transform these into a workable report.
Being proactive when planning the sales strategy while allocating sufficient amounts of money for the sales team to function optimally forms the basis for having an accurate forecast. For this reason, there’s a right way to perform a business sales forecast, and below are some essential points to ponder:
- Choosing the most suitable forecasting method
Fortunately, there are a few different methods of doing sales forecasting. However, there’s no right one that will suit the needs of all companies, thus leaving management to find the process that’ll work best with the type of product it sells, the size of the sales team, and the resources available.
Some of the most popular methods could include the following:
- Historical forecasting that uses seasonal sales data
- Length-of-cycle forecasting looking at the progression of the sales funnel
- Opportunity stage forecasting using a specific stage of the sales funnel as a comparison in the next funnel
Whichever method the company uses, it should continue with the same process throughout the forecasting period to avoid becoming overly optimistic, inflating the sales pipeline, and targeting unrealistic closing dates.
- Comprehensively list all services and products
During this step, companies should carefully and comprehensively list all of the services and products the sales team will sell. Leaving out anything could affect the calculations and estimates used during the forecast report.
Companies can effectively use sales reports to include all the information they need and improve their forecasting, including a report on the type of products that sold well historically. According to Harvard Business Review, there are three types of data that could be essential for any business to analyze before making their sales forecast: employee data, customer data, and outcome data.
- Estimate the expected sales volume for each product
Considering all past sales of the same product, companies can estimate the amount of product they’ll sell with the amount of sales personnel available. Factors to include in this estimation are seasonal changes, market fluctuations, comparison to competitors’ pricing, and changes to the workforce.
- Describe the monetary or unit price for all goods
Here, businesses should determine the price at which they’ll retail each of the product items on their list. This part of the forecast must be as accurate as possible, as it’ll play a vital role in the calculations in the next step. Data analytics thus becomes essential for businesses to have all the information they need to make their estimations.
- Make accurate calculations about the sales
The calculations for an accurate sales figure would need updating the items list with all the product details and pricing options. Getting to an estimated sales figure would require the team to multiply the number of goods it intends to sell by the unit price for these products. Furthermore, this total could become the team’s next sales goal and part of the final calculations.
- Verify the costs for production and operations
To work out the cost per unit, the company should include its cost accounting so that management can make fully informed business decisions, according to Investopedia. Multiplying this cost by the estimated sales volume will provide the total amount businesses should include in their budget for the production and operational costs.
- Make the final estimations and determine the totals
Finally, the sales forecast will be complete once the team has all the information in a collective document. The comprehensive report will indicate the projected sales, total costs, and amount of profit and show how much effort the sales team will have to put in to achieve the calculated results.
After deducting the cost-to-company from the projected sales volume figure, the team is left with an estimated value for its sales forecast. Instead of doing all these calculations manually, companies can use the right software solution for their needs and have a correct prediction in minutes as long as all the data on the system is faultless.
The final words
Although there are many variations of making accurate sales forecasting, companies would do well to use the one that’ll give them the best results. After all, their future growth and profitability depend upon making exact estimations to secure their market position.