Why is a sales forecast important?

Firstly, a sale forecast is of particular interest to prospective investors keen to assess the scale of an investment opportunity. However, it is also a difficult section for entrepreneurs to compile as they lack historical data upon which to base their projections. The key for entrepreneurs is for them to make some plausible assumptions that they can defend. Ideally they should look to track down proxies or analogues so their data is equivalent to similar sized companies targeting a similar market niche (and with similar resources). Business planning is not accounting. And sales forecasting is not about being 100% accurate as none of us can predict the future. Sales forecasting is designed to help you assess the likely demand levels so that you can be properly equipped and have adequate resources in place. By spending time assessing the likely range your sales will fall into, you will get a better sense as to the opportunity. This will also help prospective investors evaluate the opportunity and assess the entrepreneurs ability to marry a compelling narrative with plausible forecasts.

Once you are up and running, and get one month’s actual figures you can then evaluate the forecast for the rest of the year using the first month as a reference point.

Not only is sales forecasting challenging, preparing a sales forecast can also be very time consuming. Many entrepreneurs will attempt to create a worksheet in Excel, but will quickly realize how time consuming it is making sure they include all the right sections and the headings. Once complete they will probably want to use the data to create graphs or charts — again a difficult and time consuming process. With LivePlan however, once you enter the data where prompted it will automatically ensure that the data filters through to all other relevant worksheets. It also uses this base data to populate the graphs so that you can include a powerful visual representation of the data in your business plan. The time saving is considerable. However, more importantly, with LivePlan, you also gain peace of mind, knowing that the worksheet you are using is indeed accurate and that the data feeds through so you do not have to re-enter the same data in another worksheet.

Finally, LivePlan is jam packed with business planning content and resources so you can learn a lot more about what a sales forecast contains and why it is so important.