Financial management 3 – forecasting sales

In recent posts in business coaching Brisbane, I highlighted the need for regular accounting and for comparing actual results against your budgeted target.

Now for the really tough part of your budget!  That is forecasting revenue.  This is difficult because any realistic revenue forecast depends on what your plans are to attract potential customers and convert their interest into sales.  Most people do not have a clear idea of this because they are inexperienced.

If you have no real plan, or you adopt a shotgun approach to see what works and what doesn’t, then your budget revenue is probably going to be low.

In my experience, the majority of people make the mistake of assuming sales will somehow just happen, as if by magic.  That’s the ‘rose coloured glasses’ effect.  You can’t be complacent!  You have to make sales happen and you must have a clear plan of action.

So forget about assuming a one line sales figure in your budget.  Dig in behind the figures and think about what specific actions on your part will generate sales.  Any financial forecast should be merely a reflection of your intended actions.

The sales equation is ‘Sales Revenue = Price x Volume’.  Now there are two variables but even this is too general.  You must dig down further and determine the day-to-day drivers of ‘price’ and ‘volume’.

Get specific and assume nothing.  Get real with your pricing and take off your rose coloured glasses when figuring out where your sales volume will come from.  You must build your sales budget from the ground up, group by group, customer by customer if necessary.

This is the only way that you will be able to find out why your actual sales, in any month are under or over your budgeted sales.  Knowing where you over-performed or what you need to work on next month is priceless management information that can only come from taking the budgeting process seriously and building a useful sales history.

So why do I give you this valuable information free?  Because I know from experience that only a handful of the 40,000 readers of this blog will take any notice at all.  But to the few who do, it will put you one step closer to controlling your business, instead of allowing it to control you.

Check out previous Financial Management 1 & 2 posts by business coaching Brisbane.

Two interesting sites I highly recommend you visit are:

Spiral Photography at http://www.spiralphotography.com.au

Griffith Aikido Institute at http://www.griffithaikido.com.au

Until next time!

Gary