In today’s society, everyone seems to be obsessed with sales. While sales may not be the most important number on the financial statements, it is definitely the most emphasized. Yet few people actually use a tool to help them forecast their sales.
So what’s the big deal with forecasting sales? For starters, forecasting sales can help you measure against your goals and budget. Are your sales at the level that you expected? If sales are lower than budget, you could ask yourself the following questions: Is there something in the marketplace that is changing? Are prices too high? Are we targeting the right customers? Do we have the right team selling? If sales are higher than budget, you want to know why. Did you low-ball the budgeted number just so that you could say you did better than budget or did you change something in your sales process that is a newfound strength to help you grow?
Once you learn to start looking at the information this way, these questions should come more naturally which will help you make better decisions in your business. For instance, let’s look at the forecasted sales being lower than budget scenario. In this instance, you do not have enough in the pipeline to reach your goals. One key reason could be that your sales team has a piece missing. This could be due to not having the proper tools to help them sell your product or service, a lack of motivation whether internally or due to compensation structure, or them simply not being a good fit for your company. On the other hand, you might find out that the sales team has had plenty of activity, but the price is just too high for consumers to buy. Just knowing that you need to start investigating the causes of the low forecasted sales numbers can help you prevent months of unimpressive numbers.
In a more positive scenario, forecasted sales could be much higher than budget. While this sounds great, there could still be decisions that need to be made. For instance, what if your team is at capacity, yet the forecast shows that sales are going to be much larger in the future. Now you have to look at a potential hiring decision. If the sales are only forecasted higher for the next two months, it might make more sense to work with contractors to outsource the work so that you can survive those busy months. However, if the forecast is overloaded for the next six months, then it might make more sense to find someone who is a good fit for the company and hire them.
The idea with using the sales forecast is that it is a tool for you to use so that you are more prepared to make more educated decisions in your business. At the very least, tools like these can help the decision making process much easier.