How can accurate sales forecasts enhance your business?
Often, companies struggle to find the right balance between under forecasting and over forecasting their sales. This causes substantial money losses and puts the organization at risk.
However, it is possible to get close to accurate values thanks to modern technology.
Today, if you are a product leader or responsible for product launching, you need to master the basics.
In this blog article, we gathered for you the essential tips to help you understand the stakes at hand and avoid pitfalls. Keep on reading.
Image source: Pexels
Table of contents
- What is a Sales Forecast?
- Why do you need Sales Forecasts?
- The 5 business end uses of sales forecast
- Techniques for accurate sales forecast
- Sales Forecast parameters
- Sales Forecast metrics
- The best Sales Forecast tools
What is a Sales Forecast?
A sales forecast is a realistic estimate of future revenues. Based on a sequence of analytical studies, sales forecasts often rely on historical data, market demands, and the actual state of affairs to deduct the closest value possible. They can be weekly, monthly, quarterly, or yearly and vary according to the business goal.
Why do you need Sales Forecasts?
Every firm needs consistent sales forecasts to get effective action plans. As they are key budget matrices, they are thus important components of the business strategy.
Sales forecasts provide powerful insights to adjust shots, following a reassessment of a company’s SWOT1. In consequence, the whole future of the organization depends on its success.
A well-thought sales forecast is the thin line between smart and poor planning, a thriving industry, and one on the verge of bankruptcy.
1. SWOT: Strength, Weakness, Opportunities, and Threats
The 5 business end uses of sales forecast
Sales forecasts are performed towards 5 specific end uses comprising resource allocation and waste management, as well as an overview of short-term and long-term performance.
In fact, sales forecasting is a process performed towards 5 end uses, each of those is fulfilled in a defined period of time:
- Sales Planning
- Demand and Supply Planning
- Financial and Budget Planning
- Inventory of warehouses and Replenishment of retail centers
- Master scheduling
Techniques for accurate sales forecast
Accurate sales forecasts require a minimum of proven techniques. To obtain good results, valid techniques combine a good quality of data and smart predictive analytics.
What are these techniques?
Among others, they regroup :
-Scenario scripting: exhaustive documentation of the state-of-the-art to cover all the aspects of your industry in the best and worst possible case and by using intuition i.e "What ifs"
- Definition of the settings of the product and service commercialization: "Who, What, Where, Why, How much" to focus on the factors that may have an impact i.e Persona, buying behavior, customer lifetime value, trends, etc.
- Opportunity tracking is also of extreme importance. This can be done by splitting the pipeline funnel into different target stages to achieve a scalable goal.
Ex. prospecting, leads, quote, qualified, validated, vetted, procurement, closing, won or lost.
-Preferring modern technology to obsolete ones. Investing in recent advanced software instead of continuing to use older ones will ensure that you are on track with today's game.
-Regression models: This last technique is quantitative and considers each and every circumstance that may affect sales.
It uses multivariate statistical models and calculations gathering a set of deterministic parameters, historical data, dependent and independent variables, etc.
This one is undoubtedly the most reliable method as long as you can pinpoint all the impactful parameters.
Sales Forecast parameters
As mentioned earlier, parameters to consider include then past records, stock price fluctuations, clients' predisposition, and competitors' positioning.
Then the board of executives, the sales force, and the domain experts' opinions should also matter.
Sales Forecast metrics
As metrics, the sales forecast should highlight the aspect of one of these: growth rate, revenue, margin, gross profit, contract value, concluded deals.
The best Sales Forecast tools
Now if we put all of that in a nutshell, what is expected from the best sales forecast tools is to include, on the one hand, a statistical aspect, then, on the other hand, a feature that could follow up with the novelties, the unexpected and the natural progression of the startup of the company.
This is only met in an Artificial Intelligence-based tool that leverages a form of decision intelligence with the ability to ingest data continuously and a statistical model that improves over time.
The automated AI-platform SmartPredict is one of those. A newcomer on the field, it has already begun to catch up with the giants of the market and succeeds to provide original features. Thanks to an intuitive sleek interface, it offers citizen data scientists the opportunity to perform sales forecasting with little to no knowledge of AI. An all-in-one platform, it is able to display sales forecasts for up to six months ahead, simply by uploading historical data and adding regressors.
To conclude, it is sure that your business will benefit from it if you already applied a smart sales forecast strategy.
The latter should include records of your company's past sales and agile technology intelligence.
You can also use these insights as a few guidelines to help you decide to implement them for your enterprise.
For an accurate sales forecast, using the right methods can be crucial regarding the life of your company as it helps prepare for the unaccounted.
Therefore, the decision board can anticipate activities such as a tailored marketing campaign, for instance, to nurture their customers ‘ relationships.
In parallel, they can also adjust their products and approach to better engage prospective clients.
In order to increase the chance to obtain accurate forecasts, using AI improves the strategies drastically.
By being able to ingest time series data or evolving data, updates, and regressors, AI remains the best tool every contemporary firm should adopt in their arsenal.
Now try SmartPredict Autoflow to get accurate sales forecasts without being an expert in AI technology.
May this tutorial may help you to handle it.