Why forecasting sales is critical to your small business and where to start
Posted on August 23rd, 2021 to Uncategorized
If I were to ask you today how much revenue you will sign in contracts by the end of the year, could you answer?
Would you be giving me a firm number with confidence, or would you be guessing? Would you be taking into account actual data from your business, or going by gut feel?
The technical term for what I’m referring to is a sales forecast. Similar to looking at a weather forecast, it can help you make plans — will it be sunny or stormy? Should I pack an umbrella? What plans should I make, based on the weather heading my way?
In fact, I believe having a sales forecast — or, being able to predict revenue — is the most exciting opportunity for small business owners who are poised for big growth.
When I start working with my small business clients and ask about sales forecasting, they sometimes look at me like I have two heads. One even responded, “Well, I don’t know — do you have a crystal ball I can look into to find out?”
While I may not have a crystal ball, I can share methods of forecasting sales that will infinitely increase your ability to:
- Make better investment decisions in your business. Being able to accurately predict revenue will help you know when it’s prudent to make investments in your growth, such as hiring, marketing and innovation.
- Identify problem areas early. If you’re tracking a sales forecast, seeing dips or gaps in outcomes can indicate something in your sales process needs attention — and early detection can save you money, time and frustration.
- Sleep better at night. Just think about how much calmer and more confident you would feel being able to predict revenue with a better degree of accuracy. While the forecast may not always be sunny, at least you can plan for the weather!
At this point, you might be thinking, “Okay, Allison, you’ve convinced me that I need to better forecast my sales — but how do I do it?!”
At the end of the day, as your service-based business matures, you want to move from choosing a random revenue goal to landing on a goal that is plausible and possible based on facts.
Forecasting sales is part science and part art. Your forecast should consider both internal factors (your unique historical data and metrics), as well as external factors that can be harder to pinpoint (global pandemics, market conditions and more).
If I’m starting to lose you, or if you’re feeling a little overwhelmed, let me take a beat and tell you where to start:
Define your sales process.
Before you can begin to forecast sales, you must define a sales approach that (A) works for your business, and (B) which you’re able to evaluate, measure and improve upon.
Once you define your sales process, you can better track results at every step to see what’s working and where contracts are getting stuck or lost. Making improvements to your sales skills and systems, you’ll begin to see patterns and gain a better understanding of which potential customers will become clients and which will not — and these are the first steps in creating a long-term sales forecasting method suited to your business.
If it’s time for you to both define and improve upon your sales process, I welcome you to drop by the next Sales Roundtable — a monthly sales strategy session for founders who want to hit their revenue goals and keep on growing. Bring your questions, and we’ll tackle ’em together! Register here.