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What does it take to grow a business? How do you build upon success? What sets a company up for achieving its goals and falling short? Sales forecasting.
With the ability to predict sales performance, identify risks and build proactive strategies, businesses that use sales forecasting stand to be more successful. But how do you take full advantage of this skill? Business intelligence software is the leading solution for modern companies that want to elevate their forecasting abilities and turn them into actionable strategies for success.
Business intelligence (BI) software is designed to provide companies with all the data they need to make more informed decisions. Additionally, BI software uses algorithms to sort data, identify trends and present key findings and figures to professionals that take the guesswork out of strategic decision-making.
What Is Sales Forecasting?
Sales forecasting predicts a company’s future revenue based on historical sales data, consumer trends, and competitor performance. It can also combine market analysis to help companies determine how much they may gain if they release a new product or service. The goal of sales forecasting is to help a company determine their future profitability and mitigate risks. It can help the organization avoid investing in products or services that ultimately won’t yield profitable results.
Sales forecasting also helps companies better educate internal and external stakeholders by providing projected figures for monthly, quarterly, or annual profits. Companies can also predict their sales based on their current market share and the market’s growth. For example, if a company’s market grows by $10 million, it may project that it could earn 10% of that market in 12 months, earning $1 million.
Key Elements of Sales Forecasting
Every organization has its own sales forecasting. However, regardless of what their goals may be or what markets they serve, every business can benefit from a robust forecasting plan that incorporates these key elements.
1. Historical Sales Data
The most beneficial data that any company has is its own by.reviewing historical sales data, companies are able to better understand what products or services consumers have the most and which have underperformed In sales forecasting. Historical sales data ultimately gives organizations the ability to determine how a product or service is likely to perform over a given period of time.
Looking at historical sales data, especially with visual reports, helps identify trends and learn more about its consumers. This can help them make better decisions that ultimately increase revenue and customer satisfaction — while avoiding costly pitfalls that could harm their profits and brand.
2. Consumer Trends
IIn addition to reviewing historical sales data, sales forecasters can also review consumer trends. These trends can be within the organization, such as engagement through marketing campaigns and interactions with the sales team, as well as external sales trends in the market.
Staying on top of trends helps companies remain agile, responsive and forecast needs to provide the right solutions.
3. Market Conditions
Of course, no sales forecast report would be complete without a comprehensive analysis of the current market condition, depending on the economy, industry trends and consumer behavior, this can dramatically change dramatically year-over-year or even from quarter to quarter in more volatile industries. It's vital that every organization stays current and always understands the dominating trend of its market.
4. Competitor Analysis
In addition to understanding your own company and the market, you need to understand what your consumers are doing. Where are they outperforming your organization? How are they generating the most revenue and what is helping them currently retain or expand their market share? Reviewing competitor activity, such as new product launches, can help your organization stay agile.
The Tools to a Successful Sales Forecasting Report
You'll need a good forecast model to ensure that figures you generate are accurate and relevant to your goals. A forecasting model is a mathematical formula that helps you project future sales and validate your sales forecast.
Here are some examples:
- The percentage growth method. Calculate the percentage growth between two periods to determine how much revenue changed over that timeframe. Example: $500,000 from 2022 to $750,000 to 2023 is 50%.
- The moving average method. To calculate a moving average, divide the total sum of all your sales in the last period by the number of periods. For example, to calculate a 4-month moving average, you would divide the sales of all four months by four. This method is ideal for forecasting sales on a monthly or quarterly basis.
- The linear regression method. Linear regression can help organizations make sales forecasts based on historical sales and other variables. Its formula is a + b x period. A will represent sales while b is the slope, or change in units over the period of time. The period will be the month in relation to the start of your dataset, e.g. month 13 would refer to 13 months after a product launch.
While there are spreadsheet functions to help you calculate data, it simply isn’t practical to believe that you can get the most accurate sales forecasting without the help of business intelligence software. BI tools compile and organize data according to your needs; they can perform multiple forecasting methods to help you visualize potential sales and understand trends.
BI software won’t do everything, but it does play a large role in visualizing data and spotting important patterns that could alter your forecast.
The Power of Data Analysis
BI software uses data analysis to examine large volumes of data and draw meaningful conclusions about it. These conclusions are what ultimately help your company make data-driven designs.
You can use BI software to perform many types of data analysis that answer important questions about your organization, such as:
- What are our most profitable products?
- What products have increased in sales the most over the last year?
- What has been the revenue growth from one quarter to the next?
- What is our average customer lifetime value?
- What products are consumers buying the most?
Having these answers supported by real figures will help you better understand your audience. Of course, data can also be a great starting point for other important discussions.
For example, once you find out the top-performing products in your company, you can start to ask why. This can help you identify key features, solutions and product benefits that help you refine your value proposition, develop more products and outshine your competitors.
Sales data can also help you forecast increasing customer demand. Coupled with market analysis, organizations can find out what people are looking for the most and respond quickly to take advantage of emerging trends.
Data Visualization: Uniting Teams and Drawing Connections
BI software offers visual data dashboards and reports that help you make better sense of information. Seeing sales forecasts on a spreadsheet doesn’t often drive potential home to staff, especially those who don’t work closely with numbers. Instead, graphs and charts are the most useful tools for visually communicating sales numbers, illustrating trends and connecting potential to key data points.
Take Control of Your Sales Forecasts with DashboardFox
Crafting accurate sales forecasts can be a game-changer, and business intelligence (BI) software like DashboardFox is your secret weapon.
Forget the days of cumbersome reports and limited data access. With DashboardFox, you can build insightful sales forecasts with ease. Its intuitive interface enables anyone, regardless of technical expertise, to generate ad-hoc reports and leverage the power of self-service BI.
DashboardFox empowers you to transform raw data into clear and actionable visualizations. Build line charts, bar graphs, gauges, and more to identify trends, anticipate future sales patterns, and make data-driven decisions.
Not only that, but you get a comprehensive set of visualization tools, including scatter plots for visualizing relationships and geo maps for insightful location-based analysis.
And the best part? DashboardFox prioritizes security. You can rest assured that your valuable data is protected with tight data-level security. Viewers and report builders only see what they're authorized to, ensuring complete control over your information.
Unlike subscription-based BI platforms, DashboardFox offers a one-time fee, eliminating recurring costs. Additionally, it's self-hosted, meaning your data remains securely behind your firewall.
Ready to revolutionize your sales forecasting process? Schedule a meeting with our team to explore how DashboardFox can tailor its features to your unique needs. Alternatively, experience the platform firsthand with our free live demo sessions. Visit our website to learn more and unlock the power of data-driven sales strategy!