Illustrate the steps in creating business forecast
Answers
Explanation:
The future is unknowable, and maybe hardly predictable, but we’ve got to plan around it. We use forecasts in all walks of life, whether we’re deciding what to wear on a given day, or how many sweaters to pack on vacation.
The same logic applies to doing business: we need to create a sales forecast to govern our inventory needs and growth strategy. We need to project prices to calculate revenue, and project costs to estimate profits. We shouldn’t expect to nail future performance down to a tee, but the right approach will turn sales forecasting from a cursory inspection process to a strategic approach. It will help you manage your workforce and stock, allocate resources, adjust course, and support strategic rationales.
If you’re a manager or owner of a small business, your forecasts can be quite simple. Creating a small business sales forecast doesn’t require a huge number of data points, but you shouldn’t ballpark it. It’s a process that will lay the foundation for a realistic business strategy that’s responsive to market forces. We’ve put together an 8 step guide to creating a small business sales forecast to serve as the backbone of your growth strategy.
1. Map Your Sales Process and Pipeline.
A business grows on sales, and salespeople do better with effective pipeline management and a well-defined sales process. Map your sales process and pipeline. Define pipeline stages according to prospect behavior, whether top-of-the-funnel activity or specific benchmarks, like an agreement to review materials, an acknowledged need, or a prospect-defined timeframe. Meanwhile, a documented and managed sales process enforces consistency, reinforces accountability, clarifies opportunities, and allows for easier estimation of confidence levels.
2. Separate Individual Lines of Sale.
Separate the products or services you sell into discrete categories, such as “bicycles” and “bicycle parts and accessories”. The same can be done with services, which can be separated into billable hours, subscriptions, and so on. For clarity’s sake, use the same units when creating your sales forecast as you’d use in your accounting.