Sales forecasting (or lack of!) getting you down? Read on!
If only we as business owners, could accurately predict the future and know exactly what was going to happen next. We would all be self-made billionaires; business would be great and half our life would be spent in the Maldives. But on the other hand, less exciting. For me, sales forecasting brings an element of fun, suspense and drive. It gives me a buzz predicting where in 6 months to 6 years my business might be.
Though, sales forecasting isn’t as simple as it sounds, and with forecasting comes a certain amount of frustration particularly for smaller businesses that already have to juggle many balls. Where do we even start? Who do we listen to?
Harvard Business Review claims there are three techniques, Qualitative, Quantitative, Causal models, while Corporate Finance Institute claims there are 4 methods, Straight Line, Moving Averages, Simple Linear Regression, Multiple Linear Regression. In reality, both are right and meaningful to our business, but with so much conflicting information where do business owners start.
I have targets, why do I need to forecast.
Forecasting and targets often do cross over and can seem one in the same, although they work together they have two very different uses. While targets allow you to set a future goal and have something to aim for, forecasting allows you to look at the bigger picture and predict how you’re going to get there.
Forecasting allows you to see future trends based on previous experience both successful and not. It also allows you to include a certain amount of uncertainty in your future goals and when you discover obstacles that might arise when reaching your goals. Forecasting can be based around sales, financial outcome after cost, client retention, employee turnover and other things that you wouldn’t necessarily consider a target.
I’m worried I might not get it right.
I hear this a lot, particularly with those that don’t have the confidence in the targets they set. But what business owners should remember is that forecasting isn’t a crystal ball, it can’t predict the future because if it did, we’d be all billionaires. Forecasting comes with an element of failure, and it should because if you forecast correctly you’ll be predicting the bad as well as the good.
Being able to forecast effectively will give you the confidence you need, particularly during the hard times.
What do I forecast for?
Forecasting is being able to plan effectively. It should never be at the start of your business plan but instead be used a tool to back up the different elements within your plan and assist in reaching your goals and targets. You can forecast for as little or as much you want as long as everything you forecast for somehow relates to your business plan. Clients gained, clients lost, income, expenditure, employee growth, products delivered, new products created or even the one-off events such as moving office or buying assets. You need to forecast according to what’s right to you and what will help you reach those targets.
My forecasting says wait when I want to act now.
Your forecasting is just that, a prediction of the future, if you feel your business needs to move in another direction or at a different speed to reach your goals, then make that move and adapt your forecast. Every decision creates a new future and with that a different path. Use the information you have to forecast the bumps along the road. Your targets will drive your business, your forecasting will allow you to predict the route and time it will happen.
Over the next few weeks we’re going to go further into your sales process focusing on SPANCOP and what I like to call, the four MUST-keteers. Churn Rate, Hit Rate, Cycle Time, and of course Forecasting.
Next steps and further reading.
If you’re interested in learning more about The Sales Mindset Coach why not download a FREE chapter of my new book and at the same time register to be kept up to date on book launch events, sale dates and additional bonus content Chapter 2 – Snake oil with your sale Sir?
One step further. Head over to my Sales Mindset Coach website and view the various range of products available to help you in your sales journey, from live events, free social media groups, and online courses! There’s something for even the smallest business and there is really no reason you cannot start improving your sales today!