Being able to accurately forecast your sales is essential to your business plan. Without knowing what you project to sell, you cannot make changes or course-correct your business. Even though forecasting is educated guessing, it does not require tons of training or mastery to understand. Read more about how to forecast your sales.
Before we get into the how of forecasting, lets discuss the benefits of forecasting. Understanding your sales cycle can help you decide on how many people to hire, how your business is growing and help you reach your long-term business goals.
Without knowing how much you expect to make on your sales, you have no idea how close or far away you are from paying your monthly bills such as leases and payroll. Even if you do not have forecasting software, you can forecast on your own. It just takes a little effort and know-how.
In order to accurately forecast, you need to have accurate data. Forecasting relies on past sales data along with the anticipated future projections. By looking at the past, you can see the overall trends from week to week, month to month and year to year.
The longer you have been in business, the more data you have to review. The most recent past is the best data to use for your projections. Your data often focuses on units either of goods or services such as billed hours.
Use factoring to break down your purchases. This is handy in both retail and restaurant businesses. You can forecast the sales for a particular day at a restaurant by looking at each time of the day and the average number of tables occupied.
Then take that percentage of occupied tables by the per table average estimated revenue to come up with your projections. You can also use a similar method for retail spaces focusing on square footage.
Prices change over time. If you can project your forecasted sales, you can see where you need to raise or lower your price to meet the demand at the time. For example, if Christmas is a booming time for your business, you may benefit from additional sales by lowering your price by 10%. Knowing your projected sales units can help you come up with your estimated prices.
Don’t forget to forecast sales on new products. You can use existing products as a guide for the projected sales of new products. This estimated guess can be tweaked as you see trends in the sales of the product, but you should have a general idea of what to expect before you launch the product or place it on your shelf or menu.