Small businesses must be flexible in order to be successful. When economic times change, chances are, they must change their sales forecast. The marketing and finance departments can work together to provide a meaningful sales forecast. Sales associates are often the first line of defense regarding an accurate sales forecast. They know the needs and mood of the firm's customers. From there, finance can use economic predictions to either lower or raise the current sales forecast to be accurate for the future time period in question.
Difficulty: Average
Time Required: indefinite
Here's How:
- You should look at the current sales projection for your small business firm. Is it feasible considering the predicted future economic situation? For example, has an economic event recently affected the financial markets and is the economic forecast poor? If so, your sales may be affected.
- What is the predicted future economic situation? Based on your particular line of business, should you adjust your sales forecast up or down? For example, some businesses are recession-proof and actually do well in a recession. Other businesses, such as those offering luxury items, will not do well in a recession.
- Study the economic data and find out how much are sales in your particular line of business (retail, manufacturing, etc.) are expected to drop or rise? How does that translate to your business? Based on your particular business, do you think your sales will change as much? More? Less? This must be taken into account when you adjust your sales forecast.
- Confer with your marketing department and sales force. What are they experiencing out in the field? What is their feeling about the change in sales given the current economic situation? Have them develop a formal marketing plan using the sales forecast they develop for the time period you specify.
- Given all the data you have collected, attach a percentage to your current sales forecast and increase or reduce your current sales projection by that amount. This percentage will be based on your managerial judgement backed up by the data you have collected.
- After you adjust your sales forecast, you will have to go through your production schedule (if your firm is a manufacturing firm) and other expense items and adjust them as well. This will allow you to arrive at an adjusted profit.
- Base your other financial documents and projections around your adjusted sales forecast. When the economy normalizes, go through the same procedure again. Your sales forecast is your most important tool
What You Need
- Current sales forecast
- Current and forecasted economic data for the time period in question
- Sales forecast and opinions from the marketing department
- Computer and sales forecasting spreadsheets
