I want to offer a series of reflections on the importance and need to prepare a sales forecast since sales are the main – and only – a source of income for the company. Therefore, their correct estimation will condition its future and ability to make decisions in advance.
However, the question lies in determining how to approach the sales forecast; at Xitsus inc, with years of experience, we take care of this task. In any case, whether by over or under forecasting, one way to avoid surprises lies in how to adjust forecasts on business results.
Clarifying concepts: how to make a sales forecast
First of all, it is necessary to shed light on some notions that, although they may seem similar, are not the same. One of the biggest mistakes arises when the concept of sales potential is assimilated synonymously with that of forecasting, when in fact, they are different.
We should refer to sales potential when looking for a demand benchmark under ideal conditions. In contrast, sales forecasting should indicate our specific and reasonable consideration of turnover in business planning.
In short, the potential represents the market opportunities, while our forecast represents our expectations of the reality in which we develop our activity in a specific period.
This assessment is fundamental because the specific sales forecast of each company must be balanced with the means and resources made available to the commercial activity to precisely achieve the objectives proposed in each company.
In short, the forecast defines our sales potential.
Methods and results for sales forecasting
Premise: the diagnosis embodies the qualification that we must make based on meticulous analysis, while the forecast is the judgment we form regarding the changes that may occur in the course of our commercial activity.
Therefore, without risking to dabble in conjecture, we are faced with how to approach sure signs, indications, and evidence about what will happen to the company’s sales results.
Forecasting means living with the uncertainties of the future. Still, good sales forecasting brings significant advantages in business management: it minimizes inventory and subcontracting costs, reduces the risk of stock breakage, improves the quality of service, and avoids waste, which is almost always the most significant source of wealth.
This is why we need to have systems, models, and tools to support us in calculating sales forecasts. This requirement is best when we have historical data in a mature market.
But if the market is changing, unknown, or our portfolio is very innovative, we will have to resort to other instruments that do not only come from the historical-quantitative orbit and thoroughly analyze the results of previous market research or, in any case, evaluate the behavior of alternative or substitute products.
However, relying on concrete methods has consequences, many of them positive. Recently, a study was published which, among its conclusions, established that numerous companies – approximately 70% – belonging to various sectors, when they implement a methodology and manage to maintain it in a sustainable and lasting manner, improve their management results.
This inevitably leads us to think that in order to be accurate in the calculation of sales forecasts, we must also plan how to break them down into smaller units of a different nature… in the form of sales quotas for simpler business units and direct them to their corresponding sales staff.
It would be coherent to ask ourselves how to integrate all these aspects – starting with the diagnosis, the forecast, the establishment of concrete objectives, and their participation in specific quotas, in the control of their fulfillment in units of time… -.
The integrating framework must be a methodological instrument of unquestionable rationality in business management: commercial planning compatible with the company’s marketing planning, which we will be showing in a future installment.
Post related: A better approach to improving Sales.
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