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Grow Your Amazon Brand with Sales Forecasting

Feb 15

There is a high frequency of sales forecasting questions posed by new Amazon FBA sellers. Most of them expressed optimism regarding their new brand's prospects to be successful. Even though many experts admit they won't be able to predict future sales and profits, they aren't sure how to predict the details.

A vision of the future can be daunting. It is important to mention that each of us is not fortune-tellers, nor are we more knowledgeable about your new business than you are. You should therefore take a deep breath and relax and allow the situation to unfold at its own pace. Let's examine how Amazon sales forecasting with the Amazon inventory management system can contribute to the growth of your business if carried out correctly. 

How do sales forecasts work?

A sales forecast is used to better inform your decision-making by estimating future sales. There are several ways forecasts can be made, including taking past sales figures, looking at industry benchmarks, or studying economic trends. Basically, this is a way for you to properly manage your workforce, your ash flow, and any other resources that could possibly impact revenue and sales. Every Ecommerce platform, including Amazon has a way to help their sellers in getting accurate forecasting results.

Since they have sales data, established sellers are more likely to make accurate sales forecasts. For new sellers, however, it is imperative that they conduct market research and compare their sales numbers against those of their competitors. 

How important is sales forecasting?

In order to tell your business's financial story properly, you need a sales forecast. Upon completion of your sales forecast, you will be able to create profit and loss statements, cash flow statements, and balance sheets effortlessly.

You can set goals based on sales forecasts

It is essential that you understand, though, that your sales forecast is actually all about setting goals for your business in addition to creating a solid financial outlook. Which factors should you consider when you plan on doing a sales forecast?

  • Have you set any goals for the month ahead? Goals for a year? Perhaps 5-years? 
  • What are your goals for the next month and next year in terms of the number of customers?
  • What is the average amount of money that each customer should spend with your organization?

You'll be able to answer all of these questions, as well as any other questions you may have about the future of your business, depending on your sales forecast.

Investors use sales forecasts to make decisions

Potential investors can also see the performance and milestones of your business through a strong sales forecast. You want to make sure your business has a clear trajectory and a clear set of objectives for the future.

Use your sales forecast to develop a budget

As part of your sales forecast, you should also determine how much money you should spend. In order to run a profitable business, your sales forecast will help determine how much marketing spending to make. Also, how much you should be spending on operations of your store. Also, how you should perform inventory management Amazon warehouses to get best result. 

In your forecast, how much detail should you provide?

It is vital that you determine what to create a forecast for before you start forecasting your sales. In order to prevent being too generic, you should not forecast sales on a global scale. As an alternative, you should not create forecasts for each product that you sell through Amazon. 

Depending on the types of sales you conduct, you may need as many as ten categories. A forecast containing more than ten variables could be quite challenging, and fewer than three indicates an insufficient division of responsibilities.

The process of creating a sales forecast

Your sales forecast should be considered as an estimate of how many goods and services you hope to sell over time. You can also include the cost to manufacture and sell those goods and services, along with your anticipated profit.

In order to create a sales forecast, you will first need to take the following steps:

  • Describe the products that you offer
  • Predict the amount of each you will sell
  • Amount (in dollars) per unit of goods or services sold
  • Multiply the number of sold units by the price
  • Prices should be set before products and services are produced or sold
  • The estimated sales volume multiplied by the cost
  • Add up the total cost and then subtract it from the sales

Here's a basic overview of your sales forecast so you know what to expect. Selling a large variety of items, for instance, might require organizing similar items under unified categories. Make updating your forecasted items as easy as possible by keeping them grouped similar to the way they appear on your financial statements.

Assumptions about sales

You should remember that sales forecasts are based on assumptions. In this case, you're simply aggregating information about the future to assess it. Because these assumptions always change, it's imperative that you keep an eye on:  

Market conditions

Knowing the macro-economic effects on your business can enable you to make more accurate predictions regarding overall growth. If your market shrinks or grows, your potential for sales growth might be low or high. Understanding how your business can adapt to changes is therefore important.

How would you describe the broader market? Would you say that the economy is growing or slowing? Do you feel that industry competition is increasing? Has there been a shortage of labor or materials? Do you have new customers to contact?

Product offerings

Changing your products on a regular basis may be necessary for your business. This may include factors affecting sales to the customer or factors affecting production costs to the end product.

Seasonality

Your sales may fluctuate during specific periods during the year, depending on what you are selling. In addition to weather, holidays, new product releases, and many other factors, seasonality is believed to be a result of several factors.

Marketing activities

The amount of money you spend on marketing and even the message you use may contribute to the success of your business. You should ensure that any changes to your performance are related to marketing efforts.

Do you have a new marketing campaign in the works? Have you increased or decreased your advertising budget? Do you make changes to your digital advertising targeting? Does your overall marketing strategy include a variety of channels, or do you intend to eliminate some from it?

What is a reasonable forecasting time frame?

In order to have a superb sales forecast for the next 12 months, you need to forecast monthly; then, you can forecast an annual forecast for the next three to five years. You will be able to know less about the future the farther you project into the future, and you will have less benefit from it out of that view. The world, your company, and even your forecast are always going to change. Thus, you will be updating your forecast in accordance with these changes. You will also have to take into account new regulations and processes that Amazon may be imposing. 

Forecasts should be adjusted according to actual results

If you share your sales forecast with investors and lenders, you haven't done your job. Smart store owners do not use internal metrics to measure sales progress; instead, they use sales forecasts to ensure that they're on the right path. A live forecast is then developed from this sales forecast. Their business can run more efficiently with the help of an up-to-date management tool.

Conclusion

You don't have to worry about sales forecasting being challenging. Any entrepreneur can do it, and in your case, as a business owner, you are well equipped to do it. Once you know your market and your customers, you're able to forecast sales. If you are looking for a sales forecasting tool for your Amazon business setup, make sure to check Inventooly. We hope this article provides you with enough guidance on developing the best forecasting strategy for your Amazon store.