Thoughtful Thursdays - It's not in the crystal ball

This was oringally posted on June 3, 2010. After delivering a workshop this week on sales forecasting, I thought it was worth re-posting.

If you are stuck on how to begin developing your sales forecast, start with how much you would like to be paid by your business in a year, and add all business costs. This will give you an idea of what sales the business needs to generate on an annual basis.

Break the annual figure into monthly targets using your knowledge about seasonality, length of your sales cycles and economic conditions. Also use the tips below in the orginal post.

Good selling,
Richard

June 3, 2010
"I hate making predictions, especially about the future."
Yogi Berra

Forecasting sales can be an onerous task, especially for those who have not had the pleasure of coming up with one previously.

Here are a few suggestions that might make your job of sales forecasting a bit easier.

• Block off enough time to get the job done
• Do your research, pulling numbers out of the air doesn't work
• Be realistic and but don't sand bag - this is your business after all
• Run the numbers from the top down (market potential) as well a bottom up (capacity)
• Try different scenarios (best case, worst case, most likely)
• Compare your planned sales forecasts with sales and promotional activities and make sure the activities make sense - are you forecasting high sales at the same time you plan to be heavily engaged in promotion? Is this a reasonable expectation?
• If you have historical data, use it
• Have detailed forecasts for the top 20% of your customers - by product or specific service
• Plan to measure your actual results versus forecast on a monthly basis, preferably before the end of the month so you can determine where you are heading

An accurate sales forecast will help facilitate the rest of your business budgeting process.

Good selling,
Richard