How to do sales forecasts

Sales forecasting is crucial to business planning. It enables you to set out your month-by-month revenue projections for the months ahead. Making such calculations might appear daunting, but it's a necessary step if you want to ensure that your business develops successfully, says Aengus Collins

According to Geoff Hurst, marketing director at the Chartered Institute of Marketing, sales forecasting is a cornerstone of the business-planning process. "Sales forecasting is essential. If you don't plan, you can't know where you're heading. And if you don't know where you're heading, you shouldn't be surprised if you end up nowhere."

When forecasting sales, the objective is to be thorough and realistic. There is no such thing as perfect forecasting, but making well-informed assumptions is your best hope of making sure you end up with useful figures.

Because most businesses face fluctuations in demand, produce monthly sales forecasts. Bring these together in a spreadsheet to provide projections for the 12 months to come. (You can compare these figures against your likely monthly costs to establish cashflow projections.)
Compare against last year

Breaking down your total sales into different products (maybe even into different customers) could make forecasting easier. If you sell via more than one location or channel, be sure to consider each.

If you've been in business for some time, last year's trading figures provide useful points of reference. Consider how many customers you are likely to lose and gain. Which products should perform well and which ones might struggle? How long will it take you to establish new products? If you had a particularly good or bad month last year, what were the reasons and are they likely to be a factor this year?

Once you have made your sales forecasts for this year, you can use last year's figures as a benchmark to see whether your estimates are realistic. As the months go by, you can use your actual sales to amend your forecasts for the rest of the year.
Understand your market

Sales forecasting is more challenging for new businesses. If this applies to you, as well as sales you have made so far, be guided by market research. Knowledge of potential and existing customers as well as the influence of competitors is invaluable when forecasting.

"Sales forecasting is an art as well as a science," Hurst adds. "Imagination must be used to determine factors that will hinder as well as help your sales success. But this must be tempered with hard-headed research and detailed analysis of the facts.

"Sales forecasting should not be about breaking even, what you did last year or setting unrealistic targets," Hurst argues. "It relies on an accurate assessment of the market."

Ten ways to make more sales

1. Take an objective look at your existing sales strategy. Do you have the right approach? If not, adopt a more customer-focused sales strategy and re-evaluate its success in six months. Look at what has worked and what hasn't. Learn from your mistakes.

2. Concentrate on increasing business from existing customers. The cliché about 20 per cent of customers providing 80 per cent of revenue is often true. Existing punters are already convinced about your product or service - the hard part is done. Think about ways to generate more sales from existing customers. Maybe they're unaware of the full extent of products or services you offer, and how these can benefit them.

3. Go back to basics. Make sure you're targeting the right market and listen to what potential customers really want. Remember that whatever you're selling, it needs to meet people's needs.

4. Make excellent customer service a priority. Put simple steps in place, such as offering after-sales support and providing training for all customer-facing staff. As well as encouraging repeat business, keeping customers happy means that often they'll do your selling for you by recommending you to others.

5. Get your prices right. Are they too high, which is putting people off buying from you? Are your prices too low, with the net result that potential customers fail to recognise the true value of your offer?

6. Look at what you're selling. Do you need to replace flagging lines by launching a new and improved offer? Would this enable you to make more sales? Remember, solution is evolution. Successful people know when it's time to make changes.

7. Do some basic market research. Are you up to speed with the needs and expectations of customers? These can change rapidly. Also take a look at what your competitors are doing. Constantly look for ways you can provide your customers with better value for money than your competitors can.

8. Raise awareness of your business, perhaps by launching a new marketing or advertising campaign. Even a simple leaflet drop can increase profile. It might even be time to take out a new advert in your local paper. Also try to gain free publicity by getting journalists to write good things about your business. Write an attention-grabbing press release about something newsworthy to do with your business. Encourage your customers to tell others about you. Word-of-mouth recommendation is the best form of advertising there is.

9. Assess your image. Is it making you look unprofessional or out of date? Consider ways you can improve your business image. This could involve decorating your premises - or even just having a good clean and tidy around. Maybe you and your staff need to dress more smartly. Perhaps it's time to upgrade your stationery or website. Simple changes aimed at improving customer perception can make a big difference to sales.

10. Consider training. Be honest with yourself about your sales technique and how you and your people deal with customers. If you have any concerns, get some external training. You could even seek advice from a mentor with a proven track record in sales.

12 tips to help your business grow

In these difficult economic conditions, it's important to have some golden rules to keep your business on track. Andrew Miller of the Royal Mail offers his top tips to help your business grow.
Get new customers

1. Customers want personal, targeted, tangible communications that they'll remember.
2. Your messages should be creative and interesting - and they have to be relevant.
3. Don't just give things away for free - get contact details so you can get back in touch.
Keep your customers

4. A company magazine allows customers to view your information whenever they want to.
5. Listen to your customers - a simple response mechanism can tell you so much.
6. Talk to your staff - an employee magazine or newsletter is an effective way of keeping staff informed of new products, changes and good practice.
Grow your customers

7. Take the opportunity to learn more about each other - relationships grow through information sharing.
8. Dealing with complaints properly can teach you a lot about the weaknesses in your business.
9. Customers sometimes need to be asked more than once - so use multiple stages or complementary media.
Win back old customers

10. Check your customers' details are right - maybe they've moved and not told you!
11. Always resist making promises you can't keep.
12. If discounts and vouchers fail then it's time to accept the relationship is over. Remember to suppress the customer's details, so you don't keep sending them unwanted communications or wasting your marketing budget.