Forecasting. Just the word can make business owners slightly nervous. But the good news is it doesn’t have to be daunting. In fact, it could be as straightforward as 1, 2, 3…
- 1 handy template to make life easier and help you get
- 2% more profit*, from
- 3% better forecasting*
* AMR Research
In this post we’ve condensed down some of the main reasons to forecast, and some easy pointers to help make it easier to do. We’ve even created a simple forecast tool to make life easier and help you get started. It’ll do all the calculations for you, and let you see at a glance how your business is doing.
Then just follow these three steps:
1. Fill out the Expenses Forecast tab to record all of your business outgoings
2. Complete the Sales Forecast tab to help calculate your sales growth
3. View your forecast in the Summary tab – it will help you visualise what’s going on and monitor your figures over time
Why it pays to forecast
From keeping an eye on cashflow, to planning ahead for the future, effective forecasting can make all the difference to your business. But when you’re busy day to day, forecasting can all too easily slip down the To Do list.
However, it could just be one of the most important things you do for your business. Here‘s why accurate forecasting is a very good idea:
- You’ll know what’s going on with your cashflow, sales and revenue, giving you a clearer picture of your business and increased peace of mind
- You can set more accurate budgets and targets
- You’ll uncover new cost savings
- You can make better informed decisions – about everything from staff and space to your marketing and sales strategy
- You’re more likely to access finance – as investors will be more confident if you’re planning ahead
What do you want to know?
Business forecasting is so much more effective if you have a clear idea of what you’re trying to find out.
- Who is your ideal customer, how many of them can you reach? How often will they buy from you?
- Don’t forget the rule of thumb: 80% of your business comes from 20% of your customers
- What are your plans for expansion?
- What are the market conditions?
- What’s your position amongst competition? Estimate your market share.
- Are you affected by seasonal trends?
- What’s the average price of a single purchase?
Expenses are a good place to start
Many people find that forecasting their business expenses is a straightforward place to start. Don’t forget these simple rules:
Fixed costs stay the same every month
Variable costs fluctuate according to sales volume
Sales are also a very useful thing to forecast, helping you make important decisions about your business’ future.
- Look at historic data and make logical assumptions about the future
- Don’t get overwhelmed – start with a 2-year plan and build from there
Projected sales: a handy formula
Here’s how you can quickly calculate conservative, expected and optimistic projections:
Number of customers X average sales price X number of yearly purchases
= Yearly projected sales
With so many great reasons to start forecasting, plus our free tool to make it easy, there’s nothing to stop you. Start forecasting now and the outlook for your business could be bright!