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7 reasons to practice sales forecasting

Find out why forecasting is a must.
By Jimbo Owen B. Gulle |

A common fault among start-up businesses, especially those in retail and manufacturing, is that they have too much product, too few of a product, or the wrong kind of product available to sell to their customers when they want it or need it.

Imagine having a warehouse full of Santa Claus dolls in February and you get the picture.  That\\\'s why it is important for entrepreneurs and business owners to learn and practice sales forecasting, which is nothing like predicting the weather yet is both a science and an art.

Doing a better job of forecasting, say Thomas F. Wallace and Robert Stahl in their book Sales Forecasting: A New Approach, "can help the individual company increase its customer service (order fill), reduce inventories, run the plants better, and--last but certainly not least--sell more product."

Making a sales forecast is essentially predicting your sales based on your past sales performance and your analysis of expected market conditions. Making a forecast forces the entrepreneur to look at the future objectively. Taking note of the past helps the business owner stay aware of the present and helps him analyze precisely that information to see into the future.


But why, really, is sales forecasting important? Let\\\'s count the ways (according to Wallace and Stahl):

1. Forecasting helps you take the "pulse" of your company.

Second to world-class customer service, sales forecasting is the lifeblood of a company. It is a self-assessment tool to help you know how healthy your firm is. A forecast reports, graphs and analyzes the pulse of your business; it can make the difference between just surviving and being highly successful.

An accurate forecast can also help launch new products (and discontinue old ones), and chart your company\\\'s future direction.


2. Forecasting enhances your company\\\'s cash flow.

A forecast lets you know how much you could earn in a particular period of time. From this, you will know if you will have the cash to afford, for instance, hiring new employees, buying new equipment or expanding your business. A strong forecast also helps businesses make loans and secure financing, as it demonstrates to lenders the potential revenue the business can make.



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