Avoid sales forecast pitfalls
Consider how your business can avoid common sales forecasting pitfalls.
Wishful thinking
Being positive is fine, but being over optimistic with your sales forecasting will not help your business. It’s a good idea to look back at the previous year’s forecast to see if your figures were realistic. New businesses should avoid the mistake of working out the level of sales they need for the business to be viable, then putting this figure in as the forecast.
Not making your forecast achievable
You need to consider if it is physically possible to achieve the sales levels you’re forecasting. For example:
one taxi can only make a certain number of airport trips each day
a machine can only produce a given number of components on each shift
a sales team can only visit a certain number of customers each week
Ignoring your own assumptions
Make sure your sales assumptions are linked to the detailed sales forecast, otherwise you can end up with completely contradictory information. For instance, if you assume a declining market and declining market share, it’s illogical to then forecast increased sales. For more information, see sales forecast assumptions.
Moving goalposts
Make sure the forecast is finalised and agreed within a set timescale. If you’re spending a lot of time refining the forecast, it can distract you from focusing on your targets. Avoid making excessive adjustments to the forecast, even if you discover it’s too optimistic or pessimistic.
Not consulting your sales people
Your sales people probably have the best knowledge of your customers’ buying intentions, therefore:
ask for their opinions
give them time to ask their customers about this
get the sales team’s agreement to any targets they will be set – rather than just imposing a target on them, especially if they know that it’s unrealistic or unachievable
Not obtaining feedback
Having drawn up your sales forecast, you need someone to challenge it. Get an experienced person – your accountant or a senior sales person – to review the whole document.