Understand the concept of Sales Forecast and know how to predict the results of your company – WAU
The sales forecast allows a company to have an accurate forecast of how much it will invoice soon. Through solid bases, as indicators that it already uses, it is possible to arrive at the result and have an interesting perspective.
Every manager has the desire to know how much the company can grow in the short, medium and long term. This predictability allows you to invest more, offer discounts and act strategically. For this, the sales forecast is the anticipation tool that every business needs to apply.
Revenues, sales volume and other results are important, and are always under review. They show the business performance and, of course, the expectation to know what level they will reach is always high. If they are positive, it is a sign that the company is on the right track!
In this content, you will better understand what the sales forecast is and how it can be important in a business management strategy. Know how to do it and know its benefits!
What is the sales forecast?
Sales forecasting is a practice aimed at estimating the future results of a company.
Thus, it is possible to have a perspective of the financial results, such as the total sales and the general sales that will be achieved in a certain period. In simpler and more objective words: is a sales forecast.
The forecast is mainly a management tool. With technical bases, it takes this forecast from the “guess” level or just a mental projection by estimates and puts this future vision in concrete numbers.
What allows this is, precisely, the way the calculation is made and the elements it uses to propose this perspective of the company’s results.
Previous sales leads and results are some of the fundamental bases used in this calculation. From this, it is possible to have a solid vision through relevant indicators for the business.
That’s why the forecast is so interesting: it brings a scenario ready from numbers that the company has already dealt with, considering conversions from generated opportunities.
It is interesting for management to have anticipated future results in a concrete and safe way, but the sales forecast brings much more than something to quell curiosity.
Understanding the results that the business can achieve is a strategic pursuit. From this, it is possible to make changes, make improvements or adopt postures thinking about optimizing these results.
Estimating sales and earnings from them allows you to plan your entire company from that. A sales forecast executed with expertise gives basis for new investments, for example.
If the manager knows how his company will perform in the future, he also has an understanding of what this will generate in terms of profits and, of course, what percentage he can direct to the new investments needed.
Different from goals
It is common for some people to think that the forecast has some resemblance to the sales targets, which, in fact, are related to the objectives that the company wants to achieve. Thus, the definition of the result serves for employees and departments to work strategically to reach those numbers.
The forecast does not propose where you want to go, but shows what that result will be. This tool should be used only after the goals are defined and the company has already acted in a strategic way in the face of these definitions.
Therefore, the forecast will point out in an objective way what is the forecast of gains that the company has at a given moment.
What are the benefits of sales forecast for a company?
The sales forecast puts the company’s management in a solid and secure position when making its next decisions.
If it is known how much will be obtained through sales, a lot can be done from that, especially with regard to business planning and development. Next, better understand some of the benefits that the sales forecast provides!
Solid perspective of performance
All the work done in the company is done with an expectation. Marketing campaigns, sales strategies and other actions are carried out within a plan and, based on it, compatible results are expected.
When the sales forecast is made, the horizon it shows is solid and, if it meets expectations, this is a positive sign that attests to the work being done.
In this continuity of management, a more solid perspective of results and sales numbers is great to have the knowledge of what reflexes can be achieved.
Much more than just assumptions and guesses, the forecast brings a concrete scenario and that was achieved through a series of important bases, placed as factors for a calculation.
Basis for strategic decision making
If your company knows how much it will invoice, it becomes easier to devise a strategy more suited to the scenario that is being built. This forecast provides a concrete scenario of what should happen in the future, and this enables a manager to make the most appropriate decisions as to the direction of the company.
If the sales forecast brings a low expectation of results, for example, it may be the right time to review your business strategy.
In this case, lower than expected results can be the basis for changes in the sales strategy that, if really rethought, can result in the necessary change to reshape the scenario.
Every company needs the financial forecast to know if the profits will be as expected.
First of all, this is important due to the fact that a company has its costs and its needs with expenses. Because of this, the billing must be at a sufficient level for these amounts to be covered and the activity continues.
There is also a need to understand whether profits will stay as expected. Sales planning and results work is always done within a minimum expectation of financial effects.
When these profits can be visualized through the forecast, there is an important strategic gain that can be applied even to increase these values.
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Still on the importance of forecasting revenue, part of the money received can always be used for the development of the company.
Investing in the business is a need that will arise regularly, but it also depends on financial security. In this scenario, the company depends on certainty about the finances, something that only the forecast can offer.
The results of this perspective make it clear what the financial situation is and indicate whether it will be possible to make the desired investments or not. Like this, managers can prepare to make structural or physical changes, in view of the intended, which require financial support.
Greater understanding of the customer
It is important to highlight that the realization of the sales forecast involves research on leads, customers and their purchasing preferences. In this mapping, it is natural to arrive at more detailed and specific conclusions about the public and persona that consumes what your company sells.
This generates a direct gain for understanding about the customer. Having this information allows better understand the expectations that the consumer has about your business.
From this, strategic planning is able to optimize the product offer and commercial operation, always in order to increase the company’s results.
How to perform a sales forecast correctly?
The sales forecast must be calculated using some solid bases. This ensures that the number found is not just an “guess”, but a solid forecast based on concrete metrics that are constantly used.
In this calculation, you will have to use three important indicators of your business: average ticket, conversion rate and average sale value. Find out more below!
1. Average sales ticket
First, calculate the average sales ticket, dividing the opportunities already completed by the sum of all these closed sales.
2. Conversion rate
Then find out the conversion rate, which consists of the total number of leads obtained divided by the number of leads that converted.
3. Average sales value
Finally, it is necessary to arrive at the average sales value. The calculation is simple: divide the average ticket by its conversion rate, two results previously obtained. From this result, it is possible to arrive at the sales forecast, in this case, making the calculation at the periodicity that your company wants.
With the average sales value obtained, just multiply it by the number of active leads, that is, the opportunities obtained, whether weekly or monthly. The result is your sales forecast.
Given these calculations, it is not difficult to see that you will have a series of queries to be made, with leads and your last sales results being, basically, the fundamental ones.
These notes from ongoing contacts and which ones have already advanced will be in your sales funnel and, therefore, it is important to always work with this strategy. Thus, it will be possible to know which leads are already considering a conversion and are moving towards that stage.
The sales forecast is a result that brings security to the business and allows managers to work with more concrete numbers, anticipating possible plans and obtaining the security to invest in the business. Thus, development is made possible and the company manages to gain more space in the market in the long run.
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