This article is brought to you courtesy of Spotcap.

Sales forecasting. Sounds incredibly intimidating, but it doesn’t have to be. Projecting the future of your business is in fact based on looking into its past and understanding the shifts and patterns in all of the data you have. Add in a little bit of math and you will build a solid foundation for the growth of your business.

Look to the past

The first step of sales forecasting starts with analysing the performance of your business in the past. What you’re looking for is any spikes and drops that repeat over the years. A few questions you might want to consider at this stage are:

• Are my sales numbers growing/decreasing/fluctuating/staying the same?

• Are there any particular periods of time that show higher/lower numbers than the rest?

• Do these changes repeat over the years?

Graphs prove particularly helpful in answering these questions, because they can easily visualise the numbers. Once you see shifts and patterns that repeat on a seasonal basis, you’ll be able to adjust your business strategy accordingly, since it’s likely that this seasonality will also apply in the future.

Collect the data

How can you look into your past performance without the data? Here’s where your accounting records come in. The important part is to work with numbers that go as far back as possible and are precise.

Once you’ve gathered all of your figures, you then need to look forward and identify promising leads and prospects. These can have just as much of an impact on your sales forecasting as a good understanding of when sales tend to be high or low.

Finally, make the calculations. Look for ways to save time and minimise the chance of mistakes. You can use Spotcap’s sales forecast template, which automates the entire process after you submit your past sales numbers.

Be prepared

Note that a sales forecast isn't an exact snapshot into the future. Data will rarely be 100% accurate, and it is possible for your business to not match the trend you have predicted. Your business could grow faster than anticipated because of a sudden and unexpected opportunity - this can be especially true if you’re able to successfully promote your business to a new audience. Or, vice versa, a competitor could take consumer interest away from you through a creative marketing campaign or the launch of a new service.

In short, sales forecasting shouldn’t replace macroeconomic research. You will still need to back up your business strategy with knowledge of your customers and competitors. Instead, use sales forecasting as a review and evaluation tool - compare the predicted figures to what you actually achieved that quarter. Take notes of the differences. Did you achieve your targets or not? Did you surpass them? With both negative and positive outcomes, always ask yourself why it happened. Once you know the ‘why’, you can take measures to avoid it, or make it happen again.

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