Even in a “perfect” economy, forecasting sales can be challenging. Toss in an uncertain economy or a recession, and you’ll quickly learn the important role of projecting revenue.
Being “this close” to inking a deal, when suddenly a client calls with the news that they’re on a spending freeze, can be devastating. “Most CEOs got a nasty reality check when it became crystal clear that consumers were spending less and customers frequently bailed out of big contracts at the last minute,” said Donna Fenn, of Inc. Magazine. She goes on to say, “Can you really plan for a scenario like that? It’s tough.”
Business owners and CEOs are learning from prior years and utilizing that information to develop better ways to forecast revenue. “A more conservative approach, frequent adjustments to forecasts, and a cautiously optimistic outlook” are what they all have in common, according to Fenn.
Want some forecasting strategies? Of course you do. Here’s the gist – and the gems – from the Inc. Magazine article.
Sales Forecasting Rule #1: Change your plan at least quarterly. Each year, set up an initial sales forecast for the entire year. But then, be prepared to adjust those numbers based on your sales team’s input. At the end of the month, meet with your team and compare actual to forecast. Evaluate the results. At that point, make a decision on expenses. Forecasting is one of the most critical components of running a business. Knowing what’s on the horizon is imperative.
Sales Forecasting Rule #2: Develop three plans. Establish them on best case, mediocre, and worst case scenarios for your industry. Be realistic. Know the market conditions. Expect a little of the unexpected. Review revenue growth in previous months and/or years and base your revenue in the coming months using these factors. Don’t be afraid to adjust the numbers. It’s all part of knowing your business and the market.
Sales Forecasting Rule #3: Manage your bottom line. Every business has expenses that can destroy profitability, if not managed properly. Set up a best practice solution. “If this happens, shift gears to that.” Having a better handle on revenue vs. expenses, will guide you and help manage your costs. A favorable to offset your bottom line is the result of proper revenue and expense management.
Sales Forecasting Rule #4: Survey your clients and employees. Start with sales projections using your desired growth formula then adjust based on your years of experience and client satisfaction. Consider your company’s level of quality. Direct feedback is a valuable way to measure how happy (or unhappy) your clients are. Social media and phone interviews can provide measurable information too. Then, include an allowance for the unexpected, taking these findings into consideration.
Sales Forecasting Rule #5: Start with what you know. Adjust as necessary. We all want to achieve our financial goals, right? I mean, who sits back and thinks of ways to be less productive or less profitable? Make a forecast, grow your numbers on paper, and come up with a way to fulfill it. If the economy starts tanking, don’t panic, follow your plan.
Forecasting is a guessing game. There are so many variables that can throw it off. But, with some strategic planning, historical information, and the desire to be successful, you’ll make some adjustments and get right back on track. Like any game plan, when the players work together, the team is more valuable.
At the end of the day, if you do nothing different, you can probably expect your revenue to be flat. If your plan includes growth, chances are you’ll work to achieve that goal. Do you want more of the same, less than you had, or an opportunity to be better? Stage a sales contest. Push Forward. And by all means, enjoy all of the benefits that forecasting has to offer.
Andi Sivesind is the Controller of The Radio Agency. Please follow The Radio Agency’s Blog “Sounding Board” by subscribing to the email or RSS links above.Visit our website TheRadioAgency.com