How to do Sales Forecasting for small business

Sales Forecasting for business is what a paycheck is like to salaried people. It is as important for a small business as it is for any large corporate. Being a small business owner, it is important that you have an estimate of the potential revenue your business can generate. Sales Forecasting helps you arrive at your projected revenue and predicted business growth for a given year. With the right Sales forecasting, you know exactly where you can spend what, and planning the month becomes so much better.

To simplify the concept of Sales forecasting for small business owners like you, I had Roshni Dattagupta as our guest on ‘Ace the Sales’ this week. Roshni is a Cyber Security Sales Specialist and she has been in the sales domain for more than 20 years now.

Sharing below some snippets from the value-packed podcast episode-

Is revenue forecasting and sales forecasting one and the same thing?

While Revenue and Sales forecasting are similar concepts, their meanings can slightly differ depending on the payment terms and the business model.

What is the relevance of Sales Forecasting in business?

Sales Forecast showcases your business’s potential to generate revenue each year. It also serves as a goal post for your vision and direction as to where you want to take the business forward. Instead of running behind ten different things without knowing what will hit, sales forecasting helps you achieve a sense of certainty and accomplishment.

In the absence of Sales Forecasting, answering the fundamental questions becomes difficult. For example: Being a small business owner how do you plan your investment if you do not know what is going to come in?

How can a business reduce its long sales cycle?

Reducing the sales cycle is not very easy. The sales cycle for every product is different. It also depends on how a customer perceives the product. For example, if a business is selling something expensive or on the premium side, the customer will take a longer time to purchase the product, while it might not be the case if the product is inexpensive.

More than reducing the sales cycle, it’s important to focus on increasing the pipeline. The bigger the sales pipeline, the higher the opportunities to convert them into business

How to build a pipeline with Sales forecasting?

To begin with, list down the names of all your customers/ prospects to whom you are talking in a simple excel sheet. The next step is to list down your products and services, map them as per the customers’ need, then list down the stage you are in, and once you realize the gaps that you haven’t catered or talked about to your customer, make a plan of building pipeline around it.

Understanding where you are in the conversation with your prospects is important. Find where you are in the conversation with your prospects- not starting a conversation at all, just initiated, in the middle, progressing, or at closure. Based on your stage, devise a messaging and marketing technique and start building a focused pipeline.

Is Total Addressable Market relevant in the context of Forecasting?

Total Addressable Market, popularly known as TAM is the overall revenue opportunity available to a product or service if the entire market share is to be achieved. TAM should motivate small businesses in the sense that we know that we are in a market that has more than enough opportunities for everyone to survive and make good business out of it.

When forecasting, TAM is not very important to small and medium businesses. If the business has just started and hasn’t had breakeven yet, its immediate first step should be to reach the breakeven.

What approach to follow if the sales forecast targets are not met at the end of the year? how to review it and make it more full proof for the next time?

If at the end of the year, you and your team have not been able to meet the forecast is because the numbers are either too high or too low, and neither of them is an ideal scenario. Most of the entrepreneurs think over-estimating the forecasting figures is fine but it is not, it shows that there is something wrong with their understanding of the market.

To review, you need to look back into the 3 things again-

1. Identify whether it is the right pipeline or not. Analyze whether the customers have a compelling reason to act. CRA is an important quotient in Sales forecasting. If you know the pulse of your customers correctly, you will forecast correctly.
2. Check with your sales team. If the sales team is not able to understand your sales cycle, they will not be efficient.
3. Not setting an aspirational forecasting target. Aspirations are good for your vision but are calculated in your approach when you are setting goals or revenue targets for your business. Forecasting is not an ambition, it is a realistic number.

Key Takeaways

• Understanding the importance of sales forecasting has to be a part of your business activity from Day 1. It can act as a crucial tool for small businesses that are looking to plan their future.

• Sales Forecasting will be accurate only when you have relevant data about your customers and their CRA, the market, the competitors and what they are doing.

• Identify the stage that you are in with your customer. Based on that devise a strategy to build a focused sales pipeline.

• Developing a sales discipline and setting realistic targets are the perfect ingredients needed to forecast properly.

Roshni Baronia is a Sales Coach and Consultant for women entrepreneurs.

She is the host of the Podcast Ace the Sales which encourages and enables women to fall in love with selling. Roshni is a TEDx Speaker, Author, and International Summit Speaker. She is on a mission to equip women with sales skills, systems, and strategies that help them take their business solution to more people, potential clients, and the world at large.

Originally published at https://www.roshnibaronia.com on February 25, 2022.