Sales forecasting plays a significant role in the success of any business. In a research conducted by Aberdeen Group, it reveals that businesses with more precise sale forecasts have 7.3 percent likelihood to meet their target. Moreover, the research says that businesses have a 10 percent likelihood to increase their year over year net income.
In the world of business, the most significant analysis is making accurate forecasting. The ability to forecast provides the much-needed preview into the business’ future. It is extremely valuable to top executives, key decision makers, investors, and employees. However, in spite of these advantages, many businesses are having difficulty creating an accurate sales forecast.
Our modern world today is driven by data, which means that businesses can now make informed decisions based on quantifiable analyses and research of any forces that can affect the business. While it is far from clearly seeing the future of the business or organization, sales forecasting using data can help create strategies and targets for handling resources, workforce, and cash flow. But, how do businesses use data to better understand sales forecasting?
Data Give Real Numbers
Every now and then, the sales department of the business is asked to submit a sales forecast in a monthly, quarterly, semi-annual, and annual basis. Instead of the usual guesstimating, you can use data to pull out information about customers. How they spend, their likelihood to purchase the company’s products or avail its services. Through data, the sales department can better understand customer behavior. It can determine the most immediate need of a customer knowing her place in the buying stage.
Match Up the Figures
When you make sales forecast ensure that they equal how you determine the actual sales. For instance, if you review your quarterly sales for every team of sales executives, make sure that your forecast figures do too. Formats that are standardized will abridge the spreadsheets and enable the business to quickly determine any direct gaps or correlations. Additionally, it will make the yearly review much easier.
Build Important Sales Projections
As mentioned earlier, it is crucial to have a certain consistency level. For instance, a supplier of truck parts might get the number of brake pads sold on a monthly basis; a supplier of office supplies or a manufacturer of construction materials could measure profitability margin or overall margin instead.
Connect Previous Sales Data
If the previous sales do not command the strategies of your business it can definitely give information about it. You might be able to determine a greater business influx based on the data from the past month. This is one of the most crucial information that you can have. This also means that you are gradually progressing in making a sales forecast based on data.
Understand Factors Affecting Sales
To determine why and how customers buy a particular product or avail a service, the most important factor to know is on how to sell them. For instance, a food service business understands why some products in the product line have higher sales compared to others. It could be because of the product’s nutritional content, an interesting price, or a particular range. It could also be entirely something else. These are the sales factors and by identifying their influences and the crucial roles they play in the decision-making process of your customers, you can accurately price your products.
Manage Your Profit Margins
Data will help you calculate the current and the previous cost of goods of the business. This way, you have an idea of how much the business is paying for every unit and how much it is earning in every sale. The cost of goods for the business must be considered in creating a sales forecast. The cost of goods sold by the business will differ based on the kind of products the business is selling or the services the business is offering.
Over the years, several businesses enjoyed the benefits of accurate sales forecasts. It is one of its most crucial tools that contribute to the growth of the business. By leveraging and cultivating the insight and data that the business already possesses, it can develop workable tactics and strategies that ripple positive effects on all aspects of the business. If your business is having a hard time in terms of accurately making sales forecasts, perhaps it is time that it needs to embrace the right analytics strategy to calculate the behavior of the customer.