Seeking for a certain indication of the business well-being, companies often fall short. That happens because they simply don’t know how to predict their sales and, thus, to complete the overall growth projection. That is exactly what we will be talking about in that article today. Moreover, the proper pieces of advice will be provided for those wanting to learn how the growth projections shall be calculated.
What is the best indicator of growth?
Well, it was decided that the most prominent and precise way of predicting future sales and analyzing the overall business performance is a sales forecasting. That tool helps a lot when it comes to long-term predictions. A number of methods might be used while preparing the forecasts. Those might be the historical analysis or looking at how the business was doing in the recent past, or it might even be the intuitional predictions that are based on cognitive expectations.
However, among all, the weighted forecasting is regarded as one of the ones that are used more often. That method is based on the linear model that allocates the percentage likelihood of closing the deal successfully. Then, the percentage value is multiplied by the revenue expected to be received from the deal closure. Thus, it is fair to state that the weighted forecasting method is counting all of the revenue values. Also, this method is commonly used in real estate valuation.
The cons of using the weighted forecasting method
Even though the method is overly quite precise and really easy to use, there are still some pitfalls that shall be considered.
Thus, managing the business can sometimes be an impossible thing to predict. That means if, for instance, a $100.000 revenue is expected to be gained from the deal, that doesn’t mean that this is an exact amount that will be received. As there is such thing as a conversion rate. Which, for example, is equal to 30%. The expected gain to win is $30.000 then. No, it’s not always the case. Sometimes, the business does barely manage to earn $10.000 from deals like that. This fact is indeed ignored by the weighted forecasting method.
What are the benefits of conducting sales forecasts?
When it comes to the small- and medium-sized businesses, not trying to forecast what the sales will be like in the nearest future (at least a couple of months) might be a costly mistake. Cause that might lead not only to sales being unmaterialized but also for more sales than expected to be gained, which surprisingly enough might also be an issue sometimes.
On the contrary, the analysis of the sales might provide huge benefits for the business and lead to constant improvement. It might clear out some of the sales issues, improve some business and forecasting operations, as well as prepare the administration of the business for any unexpected problems.
Using Artificial Intelligence for sales forecasting
Over the last few decades, the Artificial Intelligence field has developed drastically. Currently, there are several platforms providing forecasting services for the businesses. These allow companies to increase their performance without using any of the human resources.
For instance, Amazon has started the Amazon Forecast project recently enough. The platform uses the Machine Learning (ML) technology to provide high-quality sales and business forecasting.
Microsoft has also launched the Sales Forecasting module as a part of their Microsoft Dynamics.