Doubtless, all businesses want to generate more sales. This is why businesses invest in many marketing techniques and strategies to achieve such a goal. Additionally, it’s only reassuring for business owners to have an estimated number of sales they could make in a month or annually. This is where sales forecasting comes in. But what exactly is sales forecasting?
What is sales forecasting?
Sales forecasting is when a company utilises past sales data, the best forecasting software, and various research tools so they can gather an estimate concerning their profit in the following quarter or year. In addition to the profit side, sales forecasting is also important to business owners, since forecasting allows them to predict any future trends, allowing entrepreneurs to prepare for any potential demands their customers may have in mind.
With this information in hand, a business would increase the chances of earning more, just because they were a few steps ahead of the competition.
4 Common mistakes in sales forecasting
The truth of the matter is, sales forecasting isn’t as simple as it sounds. In fact, an inaccurate forecast may prove to be costly for a company. A small mistake may lead to misinterpretation, which, in turn, may lead to a loss in revenue. Additionally, a mistake in your sales forecast may cause you to improperly distribute your budget, which may affect how you serve your customers, hence losing sales. For you to avoid these unfortunate mishaps, take note of the following common mistakes in sales forecasting:
1. Basing business decisions on gut feeling
A good business person indeed has strong gut feelings when it comes to making important decisions, especially if they’re up-to-date on business books or articles widely available on the internet. But if you solely rely on your gut feeling, especially if it’s not justified by a comprehensive and appropriate date, then your hunches may be the cause of your business’ demise.
It’s true that even sales forecasting may catch business owners like you off guard. Besides, customers’ demands may change in an instant that no accurate data can predict. But grounding important business decisions on data spewed by sales forecasting will always be more reliable than those that are based on pure hunches.
2. Making decisions on limited or conflicting data
It’s a given that companies—especially large ones—have an array of reports and spreadsheets for the sole purpose of tracking and compiling data. Due to its quantity, unfortunately, they’re bound to have conflicting indicators or even missing data points needed to have a close-to-accurate sales forecast. Having these errors or conflicts may result in an inaccurate forecast.
If this is the case for you, then invest the time—even if it’s tedious—to resolve any conflicts. You can also search for the possible causes of these mistakes, then take the necessary actions to solve them. Of course, you can also collaborate with team members or departments to solve any problems. By doing these menial and tedious tasks, you may rest assured that you have an accurate date, allowing you to come up with a good sales forecast.
3. Failing to be flexible
When coming up with a sales plan and a budget, you should also be readily available to make any changes. Hence, it’s best if you don’t heavily rely on your sales history. However, suddenly making changes in your budget isn’t always easy. To help you out, you’d be in a better position to also update any new information coming in. This way, your sales forecasting software will be able to generate new data based on abrupt changes, which are usually caused by seasonal factors like a sudden decline in trend.
4. Ignoring customer’s sales patterns
To properly generate a budget or even a sales forecast, it’s also important to consider and interpret your prospects’ pattern. Hence, you’d want to focus on sales patterns that you’ve noticed when you make a sale. To generate many reliable sales forecasts or properly comprehend your sales pattern, you can ask the following questions:
- What particular product is well-received by prospects?
- What stage in the sales cycle is causing leads to leave?
With all that said, it’s still important to recognise that a sales forecast can’t accurately predict the future. But avoiding the mistakes presented in this article, as well as applying the best practices and having the right principles, will help you capitalise on the effectiveness of any sales forecast software. By properly utilising a sales forecast, you can boost your confidence in your predictions, helping you avoid disappointment if reality and your forecast don’t meet.