Creating a sales forecast can be a dreary slog through a routine spreadsheet. Or it can be an exciting opportunity to maximize your potential. The decision is yours. But the best sales managers rely on the sales forecast to bolster strategic decisions, determine how to allocate resources, and lead their team to success.
According to executive coach and author Scott Edinger, managers too frequently rely on intuition. If gut feelings could predict the future, we’d all win the lotto. Edinger suggests sales leaders build their sales forecast on realistic principles to manage more effectively.
Let buyers be your sales forecast guide
Your buyer’s behavior is more important than your seller’s behavior. You can get excellent insight into future sales by analyzing how your buyers are buying right now. As you investigate buyer behavior, use the the classic stages of the consumer decision-making process as your guide. These stages were first introduced by Engel, Blackwell and Kollat in the classic book, Consumer Behavior.
- Recognize the problem. What do your buyers think they need? What do you know they actually need?
- Assess the information. Where do your buyers look for information? How effective is your presence in these sources?
- Evaluate the alternatives. What attributes does your buyer value? What new competitors are arriving on the market?
- Analyze the purchase decision. What stopped your buyers from following through? When they did buy, what sealed the deal?
- Examine post-purchase behavior. Where did your buyers share information about their purchase? What positive feedback did they offer? What negative?
Once you understand how your buyers make decisions, you will be better equipped to forecast how they will buy in the future.
Strategy first, sales forecast second
A useful sales forecast begins with a clear road map. If you don’t have a plan for improving your sales, it will prove challenging to create an accurate forecast. One tool Edinger suggests is a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Create a chart for a side-by-side visual comparison of these four categories. This “big picture” will help you evaluate your business from all angles to devise a reliable strategy.
Your sales forecast always has room for improvement
The marketplace is fluid. Your sales forecast must be too. As Edinger describes in Forbes, a sales forecast represents a single moment in time. Thus, you must adjust your sales forecast to reflect changes in the economic landscape. This effort is crucial to determining where to go next. If you keep your forecast current, you’ll have more predictive data for strategic consideration. Setting aside a regular time to review forecasts will help you stay prepared for high-level decision making.
Using these tips as a guide, you can make sales forecasting an enjoyable, productive process. So throw out the crystal ball, stop consulting the oracle and get real. Whether the outlook is good or bad, an honest forecast will serve you best.