A key part of planning for your business’s future is creating a sales forecast, which is a projection of future sales. By having an estimate of your business’s future revenue, you can put together a more accurate budget with sales forecasting in retail, helping you make informed financial decisions. But, how do you do that? Is it really that simple? While creating a sales forecast takes some work, you can get the most out of it by following a few tips.
Forecast Retail Sales with Historical Sales Data
A good way to start making a sales forecast is to look at previous sales data. Pull up your year-to-date sales data and compare it to your sales data from the same time frame the previous year to see whether sales are trending up or down. If you see any unusual swings in the numbers, it’s a good idea to consider if there are any outside factors that could be causing a difference in sales, since you don’t want to make an inaccurate forecast based on a random event.
Once you’ve figured out how your sales are trending for the year, you can apply these trends to the rest of the previous year’s data to create your sales forecast. If you find that your year-to-date sales are 10% higher than they were at the same time last year, you may be able to reasonably forecast future sales at 10% more than last year’s numbers–but only if you know why the increase occurred and whether it will be sustained.
Analyze Retail Industry Sales Trends
An accurate sales forecast relies on a comprehensive survey of the competitive landscape, and factors in known events that may impact your sales. For example, if the Olympic games are coming to your city, that information should factor into your forecast. When you’re analyzing your competition, make comparisons with your peers—similarly situated companies in your industry, niche or specific market.
How often should you update your forecasts? Keep in mind that the more you check and adjust your sales forecast, the more accurate it’s going to be. Consider setting regular intervals for revisiting your forecasts. For example, you can look at your sales forecast monthly or quarterly to see how accurate your forecast was for that period and make changes for future periods.
Review Individual Product Sales
As you make your sales forecast, take a look at the products that sold the most last year and see if the sales trends continued this year. What factors might spark further growth, or deflate existing sales? You can also look at products that didn’t sell as well as expected to see if there is room for improvement. This can help you decide if you need to make tweaks to your product lines or drop some altogether.
This information helps you determine how much inventory you need for specific items. You can save money on inventory costs by lowering order quantities for items that are under-performing and ordering more of your top sellers to take advantage of any supplier discounts for buying in bulk. Having enough of your top sellers available ensures that you don’t run out of a popular item and miss out on sale opportunities. And who wants to miss out on an opportunity for more sales?
Use Sales Forecasting Software
Ensure your forecast is the most accurate it can be by using accounting software such as Quickbooks to create sales and forecast reports. Quickbooks lets you run “what-if” scenarios so that you can make informed decisions about your forecast. You can base forecasts on prior Profit and Loss Statements, or create one from scratch.
Set Sales Goals and Make a Budget
Now, it’s time to put your forecasting information to use to improve your business. Think about realistic sales goals that you can work towards and how you can reach them. Maybe you can offer more upsells, downsells, and cross sells to introduce customers to more of your products. In other words, you can entice big spenders to spend more on premium products, offer discount options for more budget-conscious buyers, and sell complementary products to frequent customers. You could incorporate new marketing tactics to reach different audiences and increase traffic. Even if business is booming, it’s a always a good idea to keep looking for ways to improve. Your sales forecast is a useful tool for your retail business, and every time you make one, it gets a bit easier.
Use the information from your forecast to make your budget, estimate how much inventory you need, and set goals for the future. As a small business owner, it’s always beneficial to have a complete picture of sales to tailor expectations. Using an accounting system, such as QuickBooks Online, you can generate a Profit and Loss statement automatically. Learn how today.