As stated in my last blog, this phase is the stumbling block for many small business owners and managers. Most owners and sales managers feel that taking a ‘broad brush’ approach is all that is needed. For example, just taking a fixed percentage to last year’s sales and increasing or decreasing that figure to derive next year’s sales. It sure is an easy way to get a number, but it doesn’t do justice to the intended forecasting process.
The goal isn’t to prove that you are clairvoyant but rather to make you think about what you will do to achieve a certain goal of sales – ideally by market, product and/or customer segment. In other words, it is supposed to serve as a basis for action.
This process should involve communicating with ‘vested interest parties (e.g. sales force members, customers/clients and vendors) and research into your market place, examination of competitive forces, economic research if available in your markets, and consideration of other elements such as potential acquisitions, and reductions in your product/service line.
Consideration also needs to be given to new customers who may represent large accounts but whose figures are not ‘annualized’ by the forecast method. Similarly, a lost ‘major’ account can skew the forecast if proper consideration isn’t given by the method used. Suffice it to say, there are many other elements that need to be considered to develop a reliable sales forecast. If this blog stops you from using the time-worn “X % higher than last year” method, I will have accomplished my goal in this blog.
HOMEWORK: Give some serious thought to how you might best approach developing your sales forecast and set a date to communicate with ‘vested interest parties’ about your sales forecasting process (as described above). I welcome your feedback on this blog and feel free to reach out for help from me at firstname.lastname@example.org. Also, please check out my new book, Set Yourself Free… How to Have a Thriving Small Business – And Enjoy It.