Sales forecasting is the process of estimating the future performance of a company’s overall sales. It might seem easy to predict how much of your product you’ll sell, but this is seldom the case. Forecasting requires delving deep into the future and predicting what will happen based on past experiences. There are sales forecasting challenges that you will encounter when you try to predict sales.
1. Seller Subjectivity
Seller’s instincts and opinions are very difficult to measure accurately. Salespeople may think that the forecast indicates a good trend for the product when in fact, it indicates a bad trend. Sometimes salespeople are so persuadable that they even take the external forecast as an excuse to carry on doing what they were already doing well. In this case, the next forecast will not reflect any change in the past performance of your product. Instead, it will be based on the predictions of your clients or competitors.
2. A Lack of Predictive Data
Sometimes, sales forecasting is impossible because you have no data to predict the future. This is especially true for new products that haven’t been produced yet. If you’re working in a new market segment, it’s impossible to predict revenue growth without accurately referencing current figures. In such a scenario, it’s best to use trend analysis to forecast revenue.
3. Technology Challenges
When you forecast sales, it is important to consider the facts stated by your clients. The current technology may determine the forecast. For example, if a client is using Excel to calculate sales figures and you are working with Salesforce.com, then your forecast will be more accurate because of the powerful tools. Lack of good technology can lead to inaccurate forecasts since it may be difficult to predict sales growth using just the salesperson’s experience and knowledge.
4. Lack of a Sales Management Rigor in the Process
Sales forecasting needs to be part of the normal process of managing the sales department. However, most companies fail to make it a practice. In this case, you may end up with inaccurate forecasts or no forecasts at all. But, if you have strong sales management in place, then the process of forecasting will become a part of your routine. This will help you predict future sales figures whereas previously they were unpredictable.
The sales forecasting process is not an easy one. You must use your experience, knowledge, and data from previous sales figures. Being able to combine all this information and accurately predict the future of your company’s sales will make a big difference in how much revenue it generates. However, since all companies are different, you need to find out what kind of forecasting works for you. Sales forecasting and budgeting are powerful tools that can help you in growing your business.