Consider that a sales forecast is a projection of what your performance as a sales organization will be at the end of a measurement period. To learn more about what a sales forecast is, watch this video.
- A sales forecast is a projection of what your performance as a sales organization will be at the end of a period of time. It's used for many, many purposes, but sales forecasting is much more than just developing a set of numbers. It's a process to help align you and your colleagues around what's important to the business. Forecasting is about managing just how wrong your forecast is, not how right it is.` The distance between actual results and expected results is a risk to your business, and that risk can be significant, even deadly.
If you expect high results but fall well short of it, you'll be stuck with extra inventory on hand, and that costs your company money, lots of money, that could've been used for better projects. At the other extreme, imagine your actual results are much higher than your forecast. Now you might have a situation where you run out of products. You have backorders, and you lose customers who are angry about it. That's why the sales forecasting process has to inform the organization what you expect to happen, but, most importantly, what contingencies do you have in place for the inevitable errors that will occur? Hey let's face it, all forecasts are wrong.
Now sure once in a while you might get a perfect prediction, but don't count on it. You must have a plan in place to manage the error. That could be in the form of a safety inventory, so you don't go into backorder. You may want a team of discounted distributors in place, so you can ship excess inventory to them. In other words, look at each consequence of being too high or too low on your forecast and develop a way to mitigate that consequence.
That way your forecasting process helps the company run a better operation while also protecting the company from uncertainty.
- Understanding the sales forecasting process
- Defining your market category
- Understanding market dynamics
- Selecting a forecasting technique
- Using quantitative forecasting
- Understand moving averages
- Using qualitative forecasting
- Using estimates from customers, sales reps, and distributors
- Using a panel of experts