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Factors to consider when designing sales forecastThe revenue your company brings in every fiscal year will vary from time to time. You can, however, establish a pattern in your revenue collection levels over the years, and use this to establish a good sales forecast. You will need a sales forecast spreadsheet for this.
Here are some important factors that you should consider to make this process more accurate:Previous performanceEvery business must consider this. Consider the previous performance across all the company levels. This will show you how you performed under different economic conditions, and then you can use that information to figure out how your business will respond should the unique conditions manifest in the projected business year.It is from this information that your company can work around its business operations to adapt to the nature of the economy, hence a more positive forecast.Global business environmentWe are living in a global village. If something happens in one part of the world, there is a good chance it might affect other businesses that are associated with it. The most affected are companies that have an international clientele. Some of the common issues that will affect your business include wars and political strife.In your sales projection templates, you can study the nature of events transpiring in your global markets and make the necessary decisions.
You might hold back on deliveries to some countries, call back some of your staff in case things seem to be getting out of control and so forth.Current industry performanceEven as your sales forecast spreadsheet will use information from previous events to forecast the future, you will also have to look at what the industry looks like at the moment. Your business might be unaffected by global events, but this does not make yours immune from the current state of the industry.Things like government legislation, policies, taxation rates and more importantly the rate of market growth will definitely affect your business performance. They eventually affect your market share, so you have to study the current industry performance too.Adjust for inflationThe is another important factor in a sales forecast that you cannot ignore. Inflation is a necessary evil that you cannot do without in your forecasting.
It affects the currency value, and therefore the disposable income in the pockets of your clients.Depending on the country where your key business is, or the market whose forecast you are working on, you might have to make projections for artificial inflationary adjustments. For a fact, no business has control over inflation. Therefore, the best you can do is adjust your forecast accordingly, anticipating the worst.Internal business environmentChanges in the business structure will almost always affect the data on your sales projection templates. For investors, changes in your management mean a certain level of unpredictability. In case your business is going through a period of transition, most investors will tend to hold back on purchases or committing to long term contracts.In case you have information that your business might be going through some internal changes over the coming weeks or months, you should factor this into your forecast.
This is because most big clients usually already know about this, at times even before you do.Your marketing effortsAs you are working on your sales forecast, you are reaping the results of the marketing techniques you used in the previous year. The sales and revenues you are earning at the moment are a testimony of your efforts in the previous year. You, therefore, have to look at this to get a better picture of what might happen in the near future.Seasonal fluctuationsNever underestimate the impact of drastic changes in the seasonal demands of your clientele. There are events that will certainly affect the business performance. If you have an event like the World Cup coming up, you might have to consider unique branding to align your company with the global trends or miss out on this opportunity.Understanding such events and planning for them will help you increase your sales and revenues to unprecedented levels.
Sales Forecast Examples. Importance of sales forecastingWhy do you need a sales forecast template?
Good foresight provides a level of realism that will help you improve or even develop new strategic plans based on your knowledge of the marketplace. Here are some reasons why a sales forecast spreadsheet will be useful:. Planning sales – Sales representatives will need forecasts to map out their activities for the projected period. Without this, they will be working in the dark. If they have quotas to meet, forecasts help them identify the prospective customers. Forecast demand –Through sales forecasting, it is easier for your company to estimate the market demand for your products. The sales team can gather information necessary for this purpose.
Inventory control – An accurate sales forecast allow your company enough room to prepare and have proper control over the inventory. This will help you avoid stock out and overstocking. With stable inventory control, this translates to better production management.
Financial planning – With the better anticipation of sales, your business is also able to make accurate profit and revenue predictions. Therefore, you can find ways of increasing revenue and your net income.
Supply chain management –This is all about resource management. Accurate sales forecasting will help you explore your options, anticipate demand and take advantage of certain market positions. Continued product improvement –Sales forecasting will essentially help you revise your production process so that you improve accuracy and all corners of business performance.Types of sales forecasting, sales projectionWhat types of sales forecasts will be expected of you in your company? Economic forecastAs the name suggests, this forecast focuses more on the general economic condition. To come up with a good forecast, you need to study the GDP over the years, national income, unemployment, spending habits of your consumers and so forth. Industry ForecastThe market demand relies heavily on the industry forecast reports. It is nearly impossible for any market to thrive in an industry that is on its knees.
Companies have to make their forecasts based on the expected performance of the industry.The demand in the market could be affected by things like spending changes in demographics, political developments, technological changes, cultural demands or distribution and promotion efforts. Company forecastWhen you are working on the sales forecast for your company, you must also look at the company forecast. The company forecast essentially is a peek into the market share of the company. You look at factors that are within the control of your company and those that you cannot influence.
You also consider the marketing plans and what your competitors are doing.There are three different classes of sales forecasts under which the economic, industry and company forecasts fall, as discussed below: Short term forecastA short term forecast is also referred to as an operating forecast. Such forecasts should cover no more than one year. You can have them on a weekly basis, monthly, quarterly or twice a year. They are important in determining things like sales quota requirements, working capital, stock requirements and factors affecting fast moving goods.For the management, a short-term sales forecast helps in improving coordination in the business policies and practices like financing and purchasing decisions. This forecast is appreciated by most managers because the results can be seen very soon. Medium-term forecastMedium term forecasts usually serve between 1 – 4 years. For this sales forecast, your company will be looking to study and understand the projected profits or budgetary control measures, production, and expenditure.Common factors that you have to look at when you are working on your sales forecast template for this include institutional credit, tax policies, and price trends.
Long term forecastDepending on the nature of your business, these usually serve for around 5 years or even more. This forecast generally does not consider seasonal fluctuations. When working on a sales forecast spreadsheet for the long term, you will consider things like changes in the competition, the changes in population or the size of your client base, the economy (boom or depression). It is usually from this forecast that new products are introduced and some dropped from the market. Sales Forecast Spreadsheets.
Implementing an efficient sales forecastHow much business do you foresee your company closing in the next month, quarter or financial year? This is where a sales forecast comes in handy.
To avoid guesswork, you need a structured plan to help in evaluating the business potential and sales estimates for the future. With these estimates, you can then work on strategies to help you meet your business goals and objectives.The following are some ideas that can help you make your sales forecast a success, and essentially, make the company a success in the market: The market positionEach year is unique in the business. You cannot expect the same situation that happened the previous year. The business environment keeps changing, and so does your market position in the cycle.
What your team has to do is to study the sales position for the previous year. With this information, you will be able to foresee what the new business year will look like.Sales forecasting with respect to your market position is supposed to be done on a quarterly basis. This is more important in the event that you are operating in an economy that is doing badly. Factors that negate the effectiveness of your sales forecastWhile sales forecasts generally succeed for a lot of companies, in some cases the sales team gets it wrong. Inaccuracies are expected, and when noticed early enough, adjustments can be made to the forecasts to respond accordingly.
The following are some of the main reasons for failure:Change in fashionThe only constant in fashion is that it is always changing. The in thing today might not be the in thing tomorrow. It is also not easy to determine when consumers will completely adopt a new trend or how long it will take for them to accept it. In case your product is similar to something fashionable, it is easier for you to succeed than if you are carving out something unique.Inadequate sales historyThe key ingredient for successful sales forecasting is proper sales history. Without this, you have no historical data to work with in anticipation of the future. As long as past data is unavailable, you will basically be forecasting based on guesses. This is a big challenge for new products.Psychological challengesThe attitudes of consumers towards your products or services might change from time to time.
It might be difficult for you to predict the changes in consumer attitude. In markets that are highly receptive to information, even a slight rumor could cause a major upheaval in consumer attitudes.Take a lotion brand, for example.
Once the rumor is out that it causes acne or skin irritation, sales will be affected significantly. It is even worse in this age of social media networking where information spreads like wildfire.Company and industry growthGrowth within the company or even the industry will not always be uniform. Growth can decline over time or stagnate for different reasons. When this happens, the forecasts will be affected. Your sales forecast template might not really capture this effectively, or might not have projected the impact of such growth, decline or stagnation, hence inaccurate results.
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