How Sales Forecasting Works

There are many different factors, some predictable and others less so, that go into managing and running a successful business. In order to make prudent short-term and long-term decisions, you need to have a way to make an informed guess as to what your sales numbers will look like in the month, quarter and year to come. By forecasting sales, managers, directors and vice presidents can estimate the value of the sales that a team, department or organization will make.

The Data You Need

In order to make an accurate sales forecast, you will need to gather several types of data. First of all, you will need to set a benchmark for success, also known as a quota. Is there a dollar figure that you expect each salesperson to meet on a regular basis? Unless you have clearly defined expectations for each member of your team, it will be difficult to form an accurate estimate of the amount of business you expect to generate.

In addition, you should have a set protocol in terms of the sales process that your team members are expected to follow. If each member of your sales staff follows the same basic method, you will have a greater chance of being able to predict whether a given sale is likely to close.

Finally, make sure to institute a follow-up procedure with each member of your staff. If a sale does not go through, you should take steps to determine the reason.

Internal and External Factors Affecting Your Forecast

Even with consistent team and department goals and a set sales protocol, there are things that can happen both within your organization and outside of it which have the potential to affect your sales forecast. One of the main internal factors that will impact your sales forecast is the number of people on your staff. If one or more of your salespeople resigns, you can expect to have lower sales numbers until you hire and train a replacement. If, on the other hand, the size of your department grows, you should expect an increase in sales.

Externally, your competitors will affect your business. Make sure to monitor any discounts or new products that competing businesses start to offer since you will need to offer similar prices and products in order to remain competitive. If a competitor decides to close up shop or goes out of business, on the other hand, you should be able to make more sales than you did in the past.

By gathering the appropriate data and monitoring all of the relevant internal and external factors, you will be able to make sales forecasts that help your business. Good luck!

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