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What is Sales Forecasting

What is Sales Forecasting

If you are clueless about sales forecasting, this article will be an insightful read. Here, I provide a clear explanation of how it works and what it's all about.
Omkar Phatak
The thing that keeps every business manager worried is the company sales. After all, it is the sales that drive the revenue of a company and keep the cash flow streaming. What sets top companies apart from the rest of the pack, is not just the quality of their product, but also their marketing and sales strategy. The factor that gives some companies an edge, in a highly competitive market, is sales forecasting.
What is Sales Forecasting and How Does it Work?
A business needs to run like a well-oiled machine, for it to reach its sales targets. However, before you can tune the functioning of a company to meet the sales demand, you need to anticipate what it is going to be. In order to meet a sales target, you need to know the market pulse and its demand for your product.
It is all about determining future market demand, through an analysis of the current market and past sales data. A company that can pitch the right sales target, by accurately gauging the market demand in the future, rarely falls short of its target.
What makes accurate forecasting possible? Obviously, it is only possible through the availability of accurate market data and its analysis. So, one of the first jobs of a sales manager is to conduct market research and determine the amount of demand that could be generated in the future. They need to identify their niche customer base and determine the amount of product demand that may be generated in the future.
There are different forecasting methods that focus on varying time scales and use different methods of analyzing market data. The method needs to be calibrated, according to the nature of a business, to yield better predictive sales data. Some sales management departments use techniques that use software to analyze past market research data and predict future sales demands.
Whatever be the method, it all involves market research as the first stage. This involves collecting the sales figures of the past years and also gauging the sales data of competitor companies. This may also involve surveys and data from test sales runs for the company product. The next stage is the most important one. Through analysis of past figures, the sales team needs to set up a short-term and long-term sales target.
Why is it Important?
Its importance can never be overstated. Firstly, it helps the management to gear up production, ensure capital availability, and calibrate marketing strategy so that the company does not fall short of a sales target, which has been determined through forecasting.
Secondly, it helps the company in gauging the market demand for any of the new products that they may be planning to launch in the future. The company can know about the changes and improvements it needs to make in its sales and marketing strategy, to increase sales.
All in all, forecasting accuracy is largely dependent on the market intelligence team of a business. Visionary sales managers have the knack to anticipate future market trends and prepare their company to effectively handle future challenges, to optimize efficiency and add more revenue.
Company sales prosper, when there is a combination of a quality product offered, which is marketed to the right target audiences, with an aggressive sales strategy. Sales forecasting methods and their implementation is vital, if you want to see your product sales soaring in the future.