To understand why sales forecasting is so important to business health, think about two example scenarios: one with a car manufacturer and another with an ecommerce shop.
In the case of a car manufacturer, cars take a long time to build. The manufacturer has a complex supply chain to ensure every car part is available exactly when they need to build cars, so the number of cars available to purchase will meet demand.
When you buy something online, whether that’s from a large marketplace or a small boutique, you get a delivery estimate. If your delivery comes a day or a week after it’s promised, that’ll affect your satisfaction with the company – and decrease your willingness to want to do business with them again.
Sales forecasting is similar in both cases. Sales forecasts help the entire business plan resources to ship products, pay for marketing, hire employees, and beyond. Accurate sales forecasting yields a well-oiled machine that meets customer demand, both today and in the future. And internally on sales teams, sales revenue that delivers in its estimated time period keeps leaders and collaborators happy, just like a shipment that arrives on time.
If forecasts are off, the company faces challenges that affect everything from pricing to product delivery to the end user. Meanwhile, if forecasts are on point, the company can make better investments, perhaps hiring 20 new developers instead of 10, or building a much-needed new sales office in a prime new territory.