Sales forecasts are an essential business practice. Good sales forecasts allow us to make plans for the next month, quarter, and year. While forecasting is an essential business activity, it doesn’t mean that your company is doing it right. Here are the top three sales forecasting techniques that might be letting your company down.
False forecasting technique #1
Not forecasting at all. Often we see businesses making big business sessions without forecasting at all. Instead they will set sales goals or order inventory based on intuition alone. This can be disastrous when it leads to goals that the company fails to meet.
False forecasting technique #2
Take last year’s numbers and multiply by where we want to be next year. While this might be a great way to set lofty goals, it is not based on what is likely to happen in the future. This technique fails to take into consideration past market trends, and future marketing activities which may or may not support the growth goal.
False forecasting technique #3
Getting so granular that you lose any true forecasting power. This happens when the leadership team asks for increasingly small breakdowns. They may ask for sales forecasts down to a small sub category or even worse by subcategory and marketing channel. The more granular the forecast the more likely it is to be wrong. Many times there is not enough data to support these very granular forecasts. This can drive analysts to use mathematical manipulations instead of historical data alone to try and break out such a small subset. While more detailed information sounds great in theory, when it comes to forecasting the more granular we get the more likely we are to see errors.
Now that you know the top false forecasting techniques you are probably asking, is there a better way? Yes, to have a reliable forecast that you can confidently make business decisions based on you need to rely on statistical methods and historical data. To make accurate predictions about your future sales it is best to use a mix of historical data for sales, market trends, and econometrics paired with planned future marketing activities and trends. This is how we create our sales forecasts which have been able to predict within 1% of future sales.
Request a demo find out more about how we can help you accurately forecast sales.