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Do you struggle to create a sales forecast for your small business that provides an accurate depiction of reality, but still encourages growth? With the possibility of higher profits on the table, no business owner should be content with a sales forecasting strategy that under-delivers.
Sales forecasts have important ramifications for businesses as they underpin growth and profit, and are integral in determining resource allocation, supply chain management, cost of sales, sales strategy, and more. Research from the Gartner Group found that improved forecasting led to tangible achievements, including a 15% reduction in inventory, and a 2% increase in revenue.
For many SMBs, where resources are limited and cash flow is king, improved forecasting can prove a significant boon to the future prospects of the company. Here are nine tips to get it right.
Collaboration is an integral element that’s often missing from a SMB’s forecasting process. A well-executed forecast analyses data from many areas of the business. It’s only with this information that you can make informed future projections. Therefore, representatives from each department within an organisation should be involved in the process.
The benefits are two-fold. Different people, who understand different sets of data, can contribute analysis that someone else might miss. While the teamwork encourages buy-in – essential if you want your forecasts to affect company performance and strategy.
Using past performance data to predict the present is the cornerstone of most sales forecast strategies. However, business realities, such as shifts in customer circumstances or industry developments, can change in an instant. So, you need to be ready to adapt at short notice if the environment is telling you to.
It’s best to allocate regular times for the forecasting process, and don’t touch it outside of that. Otherwise, it’s possible to become too consumed with forecasting, feeling the constant need to analyse how new information affects your numbers. This can turn useful points of data into a jumble of numbers with no clear through line.
You can meet as often as you feel is appropriate (monthly, or at least quarterly, is recommended), but the important thing is that the meetings are regular, and reserved solely for activities related to forecasting.
The best forecasters examine each opportunity included in the projections and ask themselves, “Is this truly an opportunity?” Is there a logical next step for the prospect to take that warrants including this data point in your forecast? It’s vital this concept is consistently applied across every potential data point. Leaders who excel at forecasting don’t let speculation disrupt their methods. Otherwise, if you include projections from sales situations that aren’t a valid opportunity, you’re handicapping your organisation.
For the best results, you need a clear and evolving view of trends impacting your organisation, and whether they’re expected to continue in the coming quarters and years. Observing high-level trends is difficult when sorting through data manually, as new data sets can push others out of mind and inhibit pattern recognition. Thankfully, there’s sales forecasting technology that can take the manual labour out of this process.
There’s clear benefits of collaboration, but there's also a hidden danger, as each business unit likely has a specific goal in mind, and their data is designed to support this. Savvy leaders know that no single set of data is capable of representing the whole organisation.
Protect your business against the risk of inherent bias by using a variety of different data sets and points of view. It’s important to have everyone involved throughout the process, but it’s the responsibility of the company’s leader to manage these potentially conflicting data sets, and steer the group toward a forecast that maximises value for the organisation as a whole.
Instead of brushing your incorrect projections under the rug, use them to constantly refine your methods and improve your accuracy in future.
A sales forecast ideally attempts to identify when, where, and how your customers buy your product, so understanding customer segments and buyer behaviour is an important part of forecasting accurately.
You can manipulate your forecasts to say whatever you want, but your revenue numbers only move when your customers make very specific decisions, and take action. Learning what drives customers to act at various touchpoints in their purchasing journey, will assist in painting an accurate picture. This insight also helps mold the customer personas your sales and marketing teams rely on.
Smart sales leaders recognise that forecasting and strategy are related, yet independent of one another. Having a well-executed sales strategy can give you important insights into your forecasting efforts, and accurate forecasts can help you make wise decisions about improving your strategy. Yet, a great forecast doesn’t automatically precipitate a sound sales strategy, and vice versa.
As you refine your forecasts and take note of gaps, and successes, use these results to alter specific components of your sales strategy. But, always remember that a sales strategy exists to move customers through the pipeline, and deliver value.
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