Common Mistakes in Sales Forecasting

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Forecasts made by sales managers or company executives may not always come true. The most common mistake entrepreneurs make is the inability to adequately assess market potential. After all, any segment has its saturation point, although consumption of products grows every day. Accordingly, underestimation can lead to false plans for the sale of finished products. In this case, the company will face a loss of potential profit and an increase in variable costs.

Analysts and top managers also make philippines whatsapp the following mistakes when forecasting:

Only one scenario is analyzed, which seems to be the most correct. When analyzing reports from previous periods, only two indicators are taken into account, most often these are the quantitative volume of sales and the price of the product. In fact, demand and consumer behavior depend on many indicators, but for some reason no one pays attention to them.

Excessive use of extrapolation. The method is based on the opinion that the level of future sales will be the same as the past. But any market is characterized by the presence of different trends that can affect demand. For example, fashion for goods of a certain type, color, use cases. Extrapolation should be used only when creating blanks on which variable components will be imposed.




Underestimation of some factors. When studying the target audience, many analysts consider only the financial capabilities of consumers. But demand is also influenced by other characteristics. For example, the political, economic or demographic situation may change, which will shift demand up or down, stimulating the emergence of a need for new products.

Analysis and forecasting of sales dynamics includes a number of determining factors. First of all, it is adequate monitoring of the market and what influences it. Secondly, it is a thorough study of the target audience and the mechanisms of its behavior. Thirdly, it is the use of various forecasting methods. If analysts have all three components, then with a high degree of probability the volume of future sales will be accurate, which will allow the organization to maximize profits.

Sales forecasting is an educated guess about the revenue that can be generated in the future. It is based on historical data and common sense. The sales forecast should be viewed by the analytics team as a benchmark to which to strive. Before starting to develop it, it is necessary to estimate the length of the average sales cycle, as well as the conversion rate. There are many ways to forecast demand and sales, and for your business you should try several methods to find the one that suits you best.