There is no shortage of Sales Forecasting Models in Excel. Models such as the moving average, exponential smoothing, and trend projection are just a few examples. But how do you choose the one that would best serve your company? However, the reality is that there is no one best approach to sales forecasting. Because every system has its advantages and disadvantages, it’s crucial to pick the one that’s best for you.
What is Sales Forecasting?
This is known as “sales forecasting,” which involves predicting future sales by looking at historical data and current market patterns. The profitability and liquidity of a business are directly tied to the accuracy of its sales projections. As the first step in creating a master budget, it is also a crucial part of the company planning process.
Importance of Sales Forecasting Factors
Given the importance of sales forecasting to a growing business, I’ve included some suggestions for increasing the reliability of your projections.
- Examine Past Records and Reports
In business, results from the past are a reliable predictor of results in the future. Conversion rates over time shed light on how many leads, groups, or people were ultimately won over. To forecast future sales and determine the pipeline coverage necessary to accomplish those forecasts, it is important to evaluate your team’s conversion rates at each level of the sales funnel.
- Describe the sales process
First, establish a structured sales procedure for each sales funnel opportunity. Each buying process stage must be defined and recorded to accurately track leads entering and exiting the sales funnel. Define a quality lead, opportunity, prospect, and close, then document the sales process stages to turn information into customers. If these guidelines are not shared, each member will define each sales process stage. Thus, you won’t have correct deal prospects data.
- Choose a Sales Forecasting Method
Sales forecasting is the next step after designing your sales process and implementing a customer relationship management system. Consider your company’s current stage of development, the size of your sales staff and pipeline, and the quality and granularity of your sales data while deciding on a forecasting model. Here, you’ll get information about the many approaches to sales forecasting.
- External and Internal Factors
When making a yearly prediction, consider the economy, market competition, and business seasonality. Thus, sales forecasting is not done once and forgotten till the following year. In a volatile climate, re-forecast at the end of each quarter and track progress daily. Unexpected events like pandemics and economic crises can derail your projection. Along with external factors, predictions should include internal factors like expanding sales teams, altering prices and promotional techniques, and releasing new items.
There is no shortage of Sales Forecasting Models in Excel. There are numerous models for analyzing data, such as trend analysis, regression analysis, causal analysis, etc. But how do you choose the one that would best serve your company? However, the reality is that there is no one best approach to sales forecasting. Because every system has its advantages and disadvantages, it’s crucial to pick the one that’s best for you.