There isn’t an entrepreneur on earth who probably doesn’t understand that the market is constantly in flux. Then within the market there are industry markets that need to be accounted for, global economies that impact each other, technology that is constantly evolving and a number of factors that will, at some point in the future, impact your bottom line and overall business growth. If you are just starting out and unsure what to do about staying abreast of an ever-changing market, here are a few things you should know about forecasting.
Projecting Sales Based on Market Forecasts
One of the most difficult forecasts to make is future sales. This is a vital aspect of running a business because everything you do is based on the revenue you bring in. From the supplies and parts you order to the number of employees you hire, if you can’t predict future sales you have no way of knowing how much inventory to keep on hand and how many people you need to run day to day affairs. At the moment there is technology that literally automates these forecasts in the background based on data accumulated from the web and your input.
The problem for many is in knowing just how to operate the platform in order to get the most accurate projections available. Companies like Indivia Australia help businesses to create automated reports from their ERP systems to provide valuable information for analysis.
Learning to Weigh Potential Sales against Realistic (Actual Historical) Sales
The information you obtain from your forecasting software is typically a general, and sometimes very specific, view of the market as it stands today and where it is forecast to be in a specified period of time. Unfortunately, you need to know how to use the program to weigh market forecasts against a more realistic assessment of what you will be able to sell. In brief terms, you will be weighing potential sales against what you expect actual sales to be based on historical data.
Herein is the problem. As a startup you probably don’t have much historical data. What you should do in a case like this is set your forecasts out for shorter periods of time, observe and analyse and continually adjust your figures based on these new ‘historical’ numbers. Also, if your industry is influenced by seasonal factors, don’t forget to adjust for those as well.
Accounting for the Development of New Products
One other factor you should keep in mind is that technology is always advancing and so there will always be an influx of newer and more efficient products. With this in mind, you can’t always forecast future sales based on products you have on hand at this moment in time so you will need to set variables in your calculations to account for the development of future products and costs incurred in developing or securing an inventory.
Technology to the Rescue
Much of this is made easier with software that is designed to collect data, analyse its impact on current market conditions and then go about forecasting where the future will take your business in terms of sales and growth. It is much easier with software developed to account for all the factors you need accounting for but in the end, the final ‘forecast’ is in your hands.
Do you run with the figures from the program or will you adjust them based on a ‘gut level instinct?’ The best advice here is to stick close to the calculations provided in the program because those are the only figures you can rely on – all else is mere conjecture. Startups may face some rough hurdles in forecasting but with the right platform, most of your decisions can be made for you quietly in the background.