How to Predict Sales Figures
Author: Russell SmithAugust 8, 2012
Rather than delving into the confusing world of sales figures, let our the team from our accountancy firm in Leeds figure it out for you.
If there is anything I’ve learned from running my accountancy firm in Leeds, it’s that you’ve got to be good at many things to own a business. Juggling a multitude of tasks, dealing with difficult customers, making astute decisions: the list goes on.
Predictions are often the work of seers hunched over a crystal ball, but in the business world, they are just another thing you have to be good at.
Making sales predictions, otherwise known as sales forecasts, allows you to evaluate your future prospects and work to maintain and evolve your business before the money is even in the bank. However, these predictions have to be fairly accurate, which is why business owners must be good at predicting.
If your predictions are way off, you can face disaster.
Imagine you’ve projected your product will sell 10,000 units but you only sell 5,000. The business may survive off those 5,000 sales, but you’ve now got a vast quantity of stock taking up room in your warehouse and 5,000 unsold units that have burned an unrecoverable hole in your pocket.
It could be worse, though. Perhaps your sales forecast had you make £100,000 in revenue. Because of your sales projections, you moved to a new premise, hired new staff and started to evolve your business, only to find you made £60,000.
This sort of inaccurate sales prediction could mean the end of your business.
So, how do you accurately predict sales figures?
Take Cues From Previous Sales Figures
Previous figures are the perfect base to start your work towards a sales forecast. It gives you real, workable data that allows you to create a baseline from which to move forward.
If you don’t have any previous sales figures, your best bet is to either trade for a few months before you make a prediction to get some data on your side or to use data from close competitors if you can access it. Look for press releases and other media that may catalogue the successes of rival businesses.
Once you have your data, you can now work on developing it to fit your current and future market.
Adapt Your Figures to Change
Things change. Your market may be booming, or it may be tanking. You have to take these sorts of changes into account when making your sales forecast. A prediction is not only based on facts but educated guesswork.
Look at your market and be realistic based on trends and growth. If things have been slowly rising, take that into account. If your market has seen huge growth, then you can likely afford to boost your figures. If your market is getting more competitive, don’t assume you’ll manage the same sales as before.
Entrepreneur have put together a helpful guide on how to analyse your market.
Compare Your Current Sales Figures to Past Sales Figures
A strong indicator of future sales is looking at your current figures against that of a previous time in your business’ lifespan.
For example, let’s say that the two previous months were June and July. Now, compare these sales figures to June and July of the previous year, and the year before that, and so on for as long as you’ve been operating.
Now you’ve got data based not only on past figures but also on your current status. This will allow you to make decisions and predict your upcoming sales. Have you seen a steady rise or decline in these months? How do future months look? Have they seen similar changes?
This type of data may not help with your sales forecast, or it may be highly valuable. The more sporadic the figures are over the years and months, the less attention you should pay to them.
Look at Your Pipeline
Your pipeline is your future prospects, leads for clients, and sales that you have underway. A pipeline is immensely valuable for your predictions, as it allows you to look into the near future. Not all leads are guaranteed, though, so be careful not to take your pipeline as gospel.
Instead, use these as a base. At regular intervals, record how many leads you have, then how many come through. From this data, you’ll be able to look back in the future and say with some certainty how many leads you are likely to secure. You’ll also be able to see if you have more or less leads than previous time periods.
A Breakdown of How to Predict Sales from Our Accountancy Firm in Leeds
So, we’ve got all the steps for making an accurate sales forecast, but for simplicity’s sake, here is how you put them together:
- Set a goal for your projects. Six months, for example.
- Use your historic data from the previous two quarters.
- Analyse your market; in this example, we discover there is a slight and steady growth.
- You look to your recent figures and compare them to historic data. You find that revenue has been rising between 5-10% over the previous six months.
- You have leads in the pipeline to back up this steady increase, with more work booked this time of the month than you did at the same point last month.
- Using a realistic outlook, you predict that sales will rise by 7.5% each month over the next six months.
Now you’ve collected all your data, you can make an informed and realistic sales prediction that is likely to support your ability to plan and grow.
These sales forecasts must not be forgotten, though, and unexpected factors such as law changes, industry disputes, new competitors, and so on should always be considered.
Regularly updating your sales predictions and monitoring them as they unfold is the best way to maintain accuracy and ensure you don’t find yourself working from improper forecasts.