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We live in a data-driven world, and that means that all businesses should be able to make informed management decisions based on quantifiable research and analysis of any internal or external forces that can impact the business.
Accordingly, sales data forecasting – while far from a crystal ball – is a critical management strategy that can’t be avoided. When used properly, it can help to inform all parts of the business – for example, you can create targets and strategies for managing your workforce, cash flow, and resources.
But data forecasting isn’t perfect. It should be given flexibility and be managed, re-evaluated and modified as conditions change, and more granular data becomes available. In theory, it can feel like an arduous task, but in practice, it provides untold freedom and security – and can even be used as a weapon to outwit rival sales teams. If you can predict incoming sales over several months, you can make more intelligent decisions and avoid repeating your mistakes.
Companies often make the mistake of thinking data forecasting is just a matter of looking at the sales history and taking an average over time. But, if you use the latest technology and combine it with some common business sense, there are plenty of ways to squeeze more value out of the projections you’re making.
- Match Up the Figures
When you create your forecasting plans, make sure that they match how you measure actual sales. For example, if you review your sales quarterly for each team of sales executives, ensure your forecast data does too.
Standardizing the format will simplify the spreadsheets and allow you to quickly identify any direct correlations or gaps. It will also make it easier to review year after year.
- Develop Key Sales Projections
As above, it’s important to keep a certain level of consistency. For example, a truck parts supplier might measure the quantity of brake pads sold per month; an office supplier, or building materials manufacturer, might measure overall margin or profitability instead.
Whatever your key sales projection, it’s one of the most valuable pieces of data you have. No matter the industry you operate in, it’s important to treat yours accordingly.
- Harness Past Sales Data
If past sales don’t dictate your future strategy, they can certainly inform it. When scaling up, you may be able to predict a higher influx of business from the previous month’s data. This is the most powerful information you can hold, and means you are already on your way to understanding how to make a sales forecast.
- Understand Sales Factors
To know how and why people buy your product, you must know how to sell it. If you’re a foodservice company, for example, you’ll understand why some product lines outsell others: a specific range, an attractive price point, its nutritional content or something else entirely.
These are your sales factors. By understanding how they influence your customers’ purchasing decision, you can more accurately predict them.
- Manage Your Profit Margins
By calculating your cost of goods (COGS), you can understand how much you are spending per unit and therefore how much you are making per sale. Your business’ cost of goods will vary depending on what you sell.
Sales forecasts can quickly become one of the most powerful tools for growth. By harnessing the data and insight that you already have, you will be able to create workable strategies that impact all areas of the business.
Knowledge is power – growing a business without data forecasting is much harder than the actual process of predicting.