Sales forecasting refers to a company’s estimation of future product sales, based on a number of factors, such as historical sales data, economic trends, and other brands’ performance.
A sales forecast empowers businesses to make effective decisions with regards to allocating budgets, organizing workforces, managing resources, and more.
Businesses with years of experience behind them may find sales forecasting easier than startups. After all, they’ll have access to historical sales data and audience insights, while newcomers have to rely on more generic market research and competitor analysis to estimate their own prospective sales.
Businesses can leverage the following techniques to build an effective sales forecast:
Companies have to understand which revenue streams they have, and segment products based on key factors (type, demographic, etc.). Ideally, break your revenue streams down so that they align with your accounting set-up — this makes it quicker and easier to analyze the difference between the forecasted sales and real sales down the line.
As already mentioned, historical sales data is an invaluable resource when a business starts to put together a sales forecast. Try to keep past figures in context, to take economic conditions and trends into account.
But remember, just because a particular line of products performed well two years ago doesn’t mean a similar one will — they may be launched into a totally different environment.
Sales forecasting for a brand-new product can be a challenge, which is where analyzing the performance of a similar product comes into play, including those released by competitors.
The resulting sales forecast may not be as accurate as it should be, but can still help businesses make effective decisions.