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Forecasting sales isn't just guesswork. It's a science
The sales and revenues that your business generates will vary from year to year. However, it is possible for you to forecast your business sales with relative accuracy.
There is a science to sales forecasting. Here are some factors that need to be considered for you to predict your sales and revenues for each year.
1. Past Economic Performance
The historical business data across all levels and sectors of the organization matters. Data of this nature is used to show what happened to the business under different conditions in the past. It can be used to determine the way your business will perform if some of the events happen again within the year. The company can use the data to adapt its operations and ride the economic wave. This, in turn, may help create a more positive forecast.
2. Current Global Conditions
The world is a global village. What happens in one corner of the world will likely affect a business at the other end of the world. Issues that have a global impact like wars and political elections therefore matter a lot to your business forecasts.
If the current global or regional conditions look like they could get out of hand, your forecasts should be adjusted for the ongoing events. You must adjust the values of your production levels, marketing efforts, and product pricing. All these things will affect your business forecasts greatly.
3. Current Industry Conditions
Even if your business is immune to what is going on in the world, it is unlikely to remain unaffected by the current industry conditions. These may include government policies that affect your business, the rate of growth in your industry, and even your market share within that sector. For that reason, the market conditions that your business grapples with will affect your forecast tremendously.
4. Rate of Inflation
Inflation is usually inevitable. It will affect the value of the currencies that you use for your business operations. You may also have to deal with artificial adjustments in inflation depending on the part of the world in which you will be doing business.
Since you have minimal control over inflation, your business needs to adjust your predictions based on what you can expect to happen. It is always better for you to err on the side of caution regarding this matter.
5. Internal Organizational Changes
Changes within the business organization usually brings about a certain level of unpredictability for investors. Many of them may have a problem investing in your business or its products during the transitional period.
If your business or organization is set to go through internal changes, you should factor them into your forecasts. This will help all the stakeholders adapt well if the sales do not meet your original targets.
6. Marketing Efforts
It is quite possible that the marketing efforts of the previous years will have a significant impact on the current sales and revenues. When making your business forecasts, consider the possible effects of your marketing activities that have already occurred. This will help you get a better picture of what exactly is expected to happen on the earnings front.
7. Seasonal Demands
If there are seasonal demands based on periodic events that are expected, consider them when making your forecasts. These demands may help raise your sales and revenues significantly.
Business forecasting is at best an estimation game for businesses. However, the level of accuracy is dependent on the factors that you consider. The more factors that you take into consideration, the closer to reality your business forecasts will be.