Here, Grant Baker, product development and manufacturing expert outlines the importance of sales forecasting.
Business can sometimes be a little like running through a minefield blindfolded, however with good planning and a large pinch of common sense it can be both personally fun and commercially rewarding.
The old adage of “failing to plan” equates to “planning to fail” holds true in that having a clear set of objectives and targets for the forthcoming trading period is more important than ever in the increasingly competitive market place.
Sales forecasting for the coming year is not an exact science, however if done with common sense and open eyes and minds for the markets you trade in it can be an extremely valuable tool in your business plans.
The bottom line is to have “Sales Targets” set in place that breaks down into quarterly, monthly and weekly numbers. In this way you can plan and prioritise how and where you will sell, to who you will sell and for what prices.
Quite simply if you don’t hit your weekly or monthly targets you need to do more in terms of pro-active selling and promotional activities. Targets need to be achievable at least, don’t set the bar too high but make sure you review how the plan is progressing and be prepared to re-visit your forecast and to stay focused on driving sales forward.
What informs an accurate forecast?
- Current market trends (research and personal and contemporary experience)
- Market analysis, growth and decline
- Customer demand (current and previous, seasonal, peaks and troughs etc)
- Global economic climate (do your sell abroad or source materials from outside the UK and what are the risks to your business)
- New business vs. existing business (what is your priority?)
- Alternative offerings (competition and similar products and services, make sure your USP is robust)
Ask yourself the following?
- How many new customers can you expect to gain in the New Year?
- What might the value and volume of those sales be?
- How many existing customers can you expect to lose?
- How can you plan to retain existing customers?
- What is your customer breakdown by market, type and product and what might it be this year?
- What is the average level of sales per customer type, and what might it be this year?
- What is the level of spend per market segment and how might it change this year?
- What are you best selling products, who buys what and what might it be this year?
- What is the trend in spending with each of your customers and market place?
- What level of spare capacity and resource do you currently have? Will this rise or fall?
Top tips for generating a forecast
- Generate a month by month plan
- Consider how your sales plan will affect your production plans. For instance so you need to communicate your plans to your suppliers or outworkers so they can plan accordingly?
- Make targets achievable and realistic and review on a regular basis
- Ensure resources are in place (materials, packaging, production time etc)
If you have a realistic and achievable forecast in place it will help you identify problems and take advantage of opportunities and more importantly …. Act accordingly
Grant Baker joined EEF (The Manufacturers Association) in 2005 and worked on the London MAS program for 4 years where he gave advice to small businesses on taking their products to manufacture and product development before moving to the South East team to deliver manufacturing and innovation services to the South East region of the UK.
Grant worked as an advisor to a group of Cockpit Arts designer-makers as part of the Commercialising Creative Content project funded by the ERDF, he worked with businesses to resolve issues around production development, production, distribution and selling via one-to-one meetings, email and phone support. In subsequent blog posts you’ll hear more from the advisors and makers involved in the project through more top tips and feedback.
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