5 Simple Steps To Forecasting Your Sales
One common goal of most small business owners is to grow their sales. The trick is, most aren't sure quite how to go about doing it.
One of the things we work on in our business coaching practice is to find simple and practical ways for business owners to run their business better. When it comes to sales, the best place to start is with a sales forecast. Forecasting your sales for the remainder of the year isn't as difficult as you might think. Here are 5 simple steps to forecasting your sales:
1. Set a goal for total sales for the year. Pick a number that makes sense to you. A quick way to get a starting number is to base it off last year's figure. Let's say you had sales of $750,000 last year and you wanted to grow 10% this year. Your annual sales goal for this year would be $825,000.
2. Calculate how much more in sales you need to achieve your annual goal. Subtract your year-to-date sales from your annual sales goal figure from #1 above. So if you had $225,000 in sales in the first quarter of the year, your sales goal for the remaining three quarters of the year would be $600,000.
3. Look for trends in historical sales. Run a few reports from you accounting system that show sales by month over the last 3-5 years (longer if you have the data) and see if you can find any patterns in your sales figures. For instance, perhaps you have some seasonality in your business. Let's say you find that over the past five years, the month of July has accounted for between 31% - 34% of your total annual sales. You could feel very comfortable projecting July sales this year of 30% of your $825,000 total annual sales goal ($247,500 in this example).
4. Prepare a report with the following four items detailed out by month for the rest of this year: i) list of backlog (defined as orders in process or contracts signed with customers), ii) list of outstanding quotes/bids for new work with an estimated percentage of winning each piece of potential new business, iii) best estimate for how much you would have in sales by month if you didn't do any marketing (if you've been in business at least 5 years, chances are you'd have some level of business if you did no marketing at all this year), and iv) estimate of any "drop-in" or "big" orders your company may get on a regular basis (e.g. every few months or years). Add up the total projected sales dollars from the four items listed directly above.
5. Create a Marketing Plan to plug the hole between your annual sales goal and your projected sales gap (i.e. subtract your answer from #4 from your answer from #2).
You'll probably be surprised how predictable your sales are when you break them down in this fashion. This also gives you confidence that you know how you're going to achieve your sales goal, realizing that your Marketing Plan is only one piece of the puzzle.