Sales forecasting is not an easy task. There are tools and methods that help making it more accurate, but none of these can change the truth: It is difficult. This is best evidenced by the fact that a good percentage of forecasts turn out to be wrong. Some say sales forecasting is a science, some say it is an art. I believe it is a bit of both.
A sales forecast is a projection based on past performances and an analysis of the future. So, this process is even more difficult when you do not have past data. This is always the case for instance, when a company enters a new country. However, no matter how difficult it can be and no matter how wrong the initial results are, sales forecasts have to be made and improved in time.
They have to be made because this projection is a vital input to the company’s budget. In fact, the whole budgeting process starts (or, should start) with the sales forecast. So, the future direction of the company rests on the accuracy of the sales anticipations. Accurate sales forecasting brings in important benefits as increased revenues, decreased costs, increased efficiency, and as a consequence of all, increased profits.
We all know that we are dealing with an ever-increasing level of uncertainty in business life. Some create an excuse out of this for not making any forecasts, but this is not an acceptable excuse. On the contrary, volatile market conditions force us to place more emphasis on forecasting and to do it more professionally than ever. Increased uncertainty only increases the need for planning. In order to minimize the risks of this uncertainty, it is advisable to work with more than one scenario while doing projections. Working with scenarios is especially helpful if the business is subject to strong seasonal fluctuations, such as direct selling. It is one thing if your forecast turns out to be wrong in a lean month, and completely another thing if this happens in your peak month.
A method that helps achieving realistic sales forecasts is making it on a rolling basis. In a direct selling environment, a suggestion could be forecasting every month for the next 12 months, and on a yearly basis for the next three to five years. Not only a forecast should say what will be achieved, it should also say how these will be achieved. However overwhelming this whole thing may seem, once the related parties in the organization get used to it, it becomes a part of life within the company.
Speaking of the members of the organization brings us to another important aspect of sales forecasting. That is, forecasting is a people-driven process. All relevant staff have to take part in this process so that they can “own” the targets. It is advisable for the top management to share their overall expectations before starting the process. It is also highly recommended to make sure the forecasting personnel understand that the forecast they are doing is to the good of whole organization, including themselves.
All that I have explained here might have given the impression that sales forecasting is a corporate task and is to be done by companies only. That’s not true at all! Exactly the same benefits apply to network marketing leaders in building their businesses, too.