At some point, as you’re setting up or running your trade business, you’ll likely come across the term ‘sales forecast’. A quick Google search and you might be thinking that you need a maths degree to wrap your head around sales forecasting, but we assure you that it’s not as intimidating as it seems.
Sales forecasting plays a significant role in the growth and success of any business and should be a key section of your overall business plan.
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A sales forecast is an educated estimate of what your sales figures will be over a certain time period, whether that be monthly, quarterly, half-annually or annually. Sales forecasts don’t need to be 100% accurate – but they do need to be reasonable.
We’ve compiled a guide for creating a trustworthy sales forecast to help you drive growth in your trade business. Here’s what you need to know.
We’re confident you didn’t start your business just to make ends meet – you want to grow and expand your service capability. That’s why sales forecasting is so important. It sets the foundation for the finances of your trade business. Beyond that, a sales forecast is about setting business goals. It’s to give you as accurate an idea as possible about your future sales and how you can use this information to make well-informed business decisions.
Here’s how you can use your sales forecast to drive business growth:
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To get started on building a sales forecast for your trade business, follow these three steps.
Once you have a list of all the services, break them out into ‘units’. For example, an HRV installation would just be one unit. A more complex job like a bathroom renovation might be made up of several different units, eg. tiling, plumbing, hardware install.
Assign a ‘unit price’ based on what you would charge the customer. Then figure out the ‘unit cost’ — what you’d spend per unit in terms of materials, petrol, consumables etc. You can look at old invoices to see what you’ve charged in the past and use average numbers in your sales forecast. Remember, you’re not trying to be 100% accurate, just as accurate as you can be.
Estimate the number of jobs you would likely be able to complete in your sales forecast timeframe. Then, multiply your unit price by the number of jobs and subtract the unit cost for the same numbers of jobs.
(Unit price x number of jobs) - (Unit cost x number of jobs)
= Sales profit
You’ll also want to consider any repeat customers. Now might be a good time to contact them directly to cement an ongoing work contract.
This method of sales forecasting is often called the ‘bottom-down’ approach. There are a couple of reasons why estimating your sales forecast this way will serve your trade business better long-term:
From there, it becomes much easier to ensure your business is set to break even before the year's end.
Building a sales forecast for an existing trade business will be easier than for a new business because an established business will have a baseline of past sales. It’s not impossible for a new business, but it will be a bit harder to get an accurate forecast.
You’ll need to research your target market and competition in your trading area. Then, use your general knowledge of the industry and analyse your research to predict your business sales.
Start by thinking about how many potential customers you might be able to contact through your various marketing and sales channels. Then, estimate how many of those people will make a job enquiry and ultimately sign on the dotted line.
For example, you might deliver flyers to 100 houses in your immediate neighbourhood. Of those 100 homes, you might get 10 people who make an enquiry. You might win three of those jobs.
This will give you an idea of how much you’ll have to spend on marketing to win the jobs you need to meet your sales forecast.
When you’re starting, you can forecast sales month-by-month and update your forecasts regularly. This will give you a much more realistic prediction of how your business will perform, rather than attempting to guess a full year’s worth of sales.
Once you have your estimates, you need to check that they’re realistic. There are several factors that could potentially affect sales:
Sales forecasting doesn't need to be difficult, but it can be time-consuming. If you've read this guide and wondered how on earth you'll be able to juggle forecasting and all the other paperwork you have to do, the answer is job management software.
Job management software like Tradify will help you take the load off the admin work and save you hours in the office. It's trusted by tens of thousands of tradies to help them with things like job scheduling, quoting, invoicing, and handling enquiries.
Sign up for a 14-day free trial. No contracts and no credit card required.