Making Realistic Sales Forecasts

Forecasting sales is amongst the most important tasks facing a new business. If your business plan is aiming to secure third party investment then it is vital that it gives realistic figures regarding your sales targets, in order to demonstrate to potential investors that they will ultimately be able to recoup their money.

Even if the purpose of your plan is simply for in-house guidance, it is still of the utmost importance that your sales are projected in a clear and concise way. This will ensure that you know whether or not you are meeting your targets, and will also mean that you can make realistic projections regarding cash flow.

Sales forecasting is far from an exact science. While many business professionals claim to be able to make exact projections and set targets stemming from those, in reality no-one is able to make more accurate forecasts that the individual running the business. As such, you shouldn’t be put off by the maths involved; you are the best qualified person to make projections for your own business.

Forecasting Basics

In order to make forecasting your sales a more manageable task, you should start by breaking your total sales down into different categories. If you offer several services or products, you should make separate forecasts for each of these ‘lines’. The lines should then be broken down into individual months. When reading a business plan, most people would expect to see sales forecasts for at least the following 12 months.

Breaking your sales down into lines has several advantages; aside from making the task easier overall, it also means that you should be able to spot weaknesses in your business structure, and compare your own projected sales figures with the estimated actual sales of your immediate competition.

Strategies

It is important that your sales forecasts also outline your sales strategy. This is distinct from your marketing strategy; while marketing looks at ways of generating interest in your business, and shaping the way it is perceived, sales strategy deals with the ways in which deals are closed and customers brought in.

Solid sales forecasts will only come to fruition if the sales infrastructure is there to close the deals. This need not consist of a huge machine; in reality, a small business’s sales strategy is likely to revolve around the manner in which customers are dealt with and the way in which leads are converted into sales. You may consider using Customer Relationship Management software, much of which is Open Source and free, to help you with closing deals.

It is also important to note that effective sales forecasts don’t simply rely on tables and graphs. Rather, these should be elucidated upon through textual analysis. Present your forecasts alongside text detailing your strategy and explaining the thinking behind your figures. From a business plan point of view, this will help investors to see that you have not simply plucked figures out of the air, and it will help you to judge whether or not you are sticking to the strategy at a later date.