How Companies and Organizations Use Sales Forecasting As A Tool for Business Planning

Sales forecasting is the process of determining future sales and selling requirements based on information currently available. Sales forecasts are critical to business planning. This is because every department in the organization relies on sales data for planning and allocating resources effectively. Planning requirements may be short term, medium term or long term. Short term requirements are usually determined to meet tactical needs in the nearest future such as production requirements while medium term forecasts are designed to meet organizational needs ranging from months to about 3 years such as budgetary requirements. Long term forecasts are mostly economic in nature and are usually made to meet the requirements of the organization in the long term. E.g. expansion plans.

The benefits of sales forecasting to organizations accrue from how its departments and organs use this information for organizations growth and development. For instance:

The Production Unit needs sales data to help them determine how much more or less quantity needs to be produced, whether or not extra machines and labor would be required for production and how customers are reacting to the product offering of the company.

The Human Resource Unit of the company will need to determine based on the sales forecast whether labor requirements are adequate to meet the staffing requirements of the company both presently and in the future, whether experts/specialists will be needed to champion growth opportunities etc.

The Purchasing Unit will need sales data to determine whether purchasing requirements will have to be increased or decreased. They will also need to determine stocking options and reorder levels, manage supplier relations to ensure raw materials purchased are delivered in the right quantities and at the right time to meet production. They will also assist to determine when to buy specific quantities of materials so as to take advantage of price discounts and avoid price hikes.

The Finance Department will need to make money available for other units to function properly based on the sales forecast made. For instance, purchasing costs which are tied to the requirements of the production unit based on forecasts made. Another example is the cost of recruitment to be made by the human resources department who needs to recruit more staff for the production or purchasing units based on sales data. The finance department will also need to ascertain revenue anticipated for long term planning and the need to fund capital costs that may border on expansion.

The Research and Development Unit works with sales forecasts to determine the effectiveness of product launches, designs, quality, technology and features. These data also serve as feedback necessary o improve product offering for the organization.

The Marketing Unit will need sales forecasts to manage the targeting of marketing activities bordering on sales and sales promotions, advertising, demographics, competitive strategies, customer preferences etc.

Because every department relies on sales data for efficiency, it is imperative that this data be reliable, accurate, timely, complete and workable to succeed.

Valentine Okolo
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Essential Tips for Writing The Financial Analysis of Your Business Plan

By Valentine Okolo

The financial analysis section of your business plan should contain the details for financing your business now, what will be needed for future growth as well as estimating your operating expenses. Starting a small business doesn't have to require a lot of money, but it will involve some initial investment. There are a number of funding options including:

Personal Financing

Small business loans

Small business grants

Angel investors

How you will finance your business is crucial. There are several questions you may need to ask yourself before arriving at a funding option.

These questions include:

·         What initial investment will the business require? How much will also be required to run on a daily, weekly, monthly and yearly basis?

·         How much control are you willing to relinquish to investors?

·         When will the business turn a profit? Which expected week, month or year?

·         When can investors, including you, expect a return on their money?

·         What are the projected profits of the business over time? One month, year, two years, five years?

·         Will you be able to devote yourself full time to the business, financially?

·         What kind of salary or profit distribution can you expect to take home?

·         What are the chances the business will fail?

·         What will happen if it does?

·         And the BIG QUESTION? How long can you sustain the business if you are yet to make profit? In other words, you are yet to break even.

Most people make the mistake of calculating the initial startup costs and then jump right into the business. This is extremely wrong.

Unless you can reasonably estimate how much it will cost you to startup, hit the ground and run the business financially for at least 18-36 months and reasonably obtain these funds(assuming the business is yet to make profit for this period of time and taking into consideration all operating costs for this period) then I advise you do not start up.

The truth is that no business starts making profit immediately. In making your financial projections, you must anticipate that it takes time to build customers and a new business may pick up slowly, operating costs may not be exactly as earlier anticipated, more hands may be required meaning more expenses and an un-eventuality may occur.

There are a variety of money sources for small business including grants, small business loans, angel investors and much more.

Debt & Equity Financing: Debt and equity financing are two different financial strategies: Taking on debt means borrowing money for your business, whereas gaining equity entails injecting your own or other stakeholders’ cash into your company. This is why I asked the question at the introduction "what do you do with your income”

Personal Income: In my opinion, personal income is the best way to raise money for your business. Trust me, it eases a lot of stress from you and you have time to adjust properly and grow your business. Decide how much you need to save monthly/yearly in order to raise capital for your business. Don’t worry if it takes years to raise this. It is better to start with sufficient capital, than to rush yourself out of business. Better still, start small. It is better to start small and grow, than to start big and crash out.

Friends & Family: Finally, consider friends and family members. This can be a good source of raising capital.

Small Business Grants: Grants are monies/financial assistance which are not a loan, and do not need to be paid back. They are usually granted by governments or special organizations as seed monies/ start up funds for new businesses in other to promote growth and development.

First Time Small Business Loan: The best place to start when it comes to finding your first small business loan or credit is not with your banker, accountant or lawyer but with you. The business is the owner so your personal credit history is an important aspect in getting a small business loan. However, banks can be a good source for generating small business loans. Always ensure that the terms of repayment are such that are favorable for your business growth and would not rub you off working capital. It is advisable you contact a financial adviser before taking such loans to avoid making a bad business decision.

Find an Angel Investor:  An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. An angel investor can help take your company to the next level in one a jiffy.

Article By Valentine Okolo

Clever Strategies For Evaluating and Managing Business Risk in Organizations

By Valentine Okolo

Managing risk is an essential part of any business. Business risks may appear in any facet of the business. Risks and uncertainty are realities every business must face. A risk presents itself where one is forced to make a choice between alternatives whose potential outcomes are unknown or where one is forced to deal with an unanticipated situation that could adversely affect the organization.


 For instance, these risks could be:

·         Financial Risks: such as investment choices, inadequate working capital, poor financial calculations, accounting fraud or excessive spending to mention a few.

·         Economic Risks: such as interest rate changes, changing government policies, exchange rate changes or demographic movements.

·         Production Risks: such as obsolete/ defective materials and goods, continuous technological evolution, product mix and quality, machine breakdown or cost of production.

·         Human Resource Risks: arising due to fraudulent employees, negligent/inefficient employees, social engineering, recruitment risks or labor drain.

·         Legal Risks: such as judgments from court cases, legal infringements, new legislation or business laws.

·         Political and Social Risks: arising from issues such as civil unrest, elections, and unfavorable ideologies of political leaders or corruption.

·         Management Risks: such as poor management decisions, insider trading, corporate governance issues, corporate policies and strategy.

·         Market Risks: such as competing against fierce competitors, changing consumer tastes or behavior, piracy, distribution and dealership issues or marketing strategy.

To effectively handle these business risks, the following steps should be taken: 

·         Assess The Risk: To effectively assess the risk the following question need to be answered. Does a risk indeed exist? If it does exist, is there any alternative to be chosen? How much information is available about these alternatives? What is the potential impact of the risk should it occur?

·         Assess the Alternatives: What would it cost the organization to pursue each of these alternatives? Note that the cost being referred to include both financial costs, human costs, cost to the organizations image, material costs, environmental costs, competitors reaction to your course of action etc.
     Alternatives could also present the option to:

a)      Transfer the Risk to another party more competent to handle it. (E.g. through insurance, joint ventures and strategic alliances, outsourcing etc.)

b)      Mitigate the Risk. I.e. to manage the impact of the risk by minimizing the odds.

c)       Ignore the Risk. I.e. brace yourself and accept the impact.

·         Implement the Alternative Chosen: Once an alternative is selected, an implementation plan is quickly arranged. The plan should clearly itemize steps needed to implement the strategy chosen. The implementation plan should also have a backup plan for another alternative strategy should the former fail. There should also be a feedback process to handle issues that may arise in the course of implementation.

Article By Valentine Okolo

10 Customer Service Skills a Customer Service Representative Needs

By Valentine Okolo

Exceeding customer expectations is no mean feat. In today’s business world, customers are increasingly knowledgeable about product choices, service standards and above all consumer rights. And so exceeding customer expectations has become a must do for any business that is serious about gaining market share, loyalty and customer trust.

Customers will continue to patronize you as long as they continue to have good experiences over and over again. This means that as a customer service representative or service person, you must continue to provide a wowing experience every time a customer visits you which lead to customer satisfaction. It therefore follows that for your business to be successful there is no substitute for satisfying the customer. In order for you to deliver that superb customer service experience, you must learn to demonstrate at all times those customer service skills that portray you a true service professional.

So here are customer service skills every customer service representative should possess.

1.       Exude Integrity at all times: Customers trust you when they know you maintain a high sense of integrity. This means that you will always treat customer transactions transparently, exude moral excellence in all deals, keep to commitment and accept full responsibility for your actions.

2.       Be Emotionally Intelligent to their needs: Customers learn to trust you when they discover you genuinely care about their feelings and their business. Showing empathy demonstrates to them that it’s not just about their money but that friendship is equally important. Emotional intelligence is the ability to learn or understand the feelings of others. When translated to service delivery, emotional intelligence becomes the ability to learn or understand the feelings of your customers. . Companies’ that display a high sense of emotional intelligence in service delivery ultimately get rewarded with repeated patronage. Please read “How to Develop Emotional Intelligence in Customer Service”.

3.       Be the Expert they need: Having excellent product/service knowledge helps you perform your duties quickly and accurately. Customers trust you when they know you have the expertise and knowledge to deliver.

4.       When you promise, always deliver: The ability to keep to promises demonstrates to the customer how dependable you are. It is better not to promise than to fail. If you discover that you will not be able to fulfill a promise due to circumstances beyond your control, quickly inform the customer and make amends if you can.

5.       Be Skilled in the Act of Managing Problem Customers: Customers do complain when they are unhappy with a situation. These customers may sometimes pour their frustrations on you. You must remain calm and understand that the customer is usually not angry at you but at the situation. In such situations, try to win the customers respect by handling the situation professionally with a view to providing the customer a pleasant experience at the end. You will find an extensive guide on how to do this in the course “Delivering 5 Star Customer Service”

6.       Communicate clearly and professionally: Ensure that your communication skills are excellent. To do this effectively, you need to learn the basics of customer communication skills. This involves learning to listen, how to ask questions, being courteous, use of wordings, how to positively use nonverbal language in communication, the use of technical knowledge and concepts in communicating with clients, anticipating and responding to customer objections etc.

7.       Be Responsible: Accept responsibility when wrong or when the company is at fault and resolve to fix the problem immediately. Do not be quick to blame others for problems or difficulties at work. Blaming yourself doesn't work, either. Understand that no matter how many mistakes you may have made, tomorrow is another chance to do better.

8.       Dress Smart: Your dressing is a reflection of who you are and the company you represent. Remember that you will be perceived and addressed how you dress. Dress beautifully, smart, professionally and responsibly.

9.       Understand What Drives Customer Behavior: Customer behavior relates to how individuals and organizations select, buy, use and dispose of goods and services to satisfy their needs and wants. Customer buying behavior is influenced by a number of factors which include cultural, social and personal factors. Please read “Understanding Customer Behavior”

10.   Finally get certified: This is not a skill but is instrumental to acquiring a skill. It is interesting to note that only a small fraction of customer service representatives have a certificate in customer service. Getting a professional certificate will help ensure that customer service representatives are able to acquire the professional skills they need to deliver service like true professionals. To get a comprehensive skill set on customer service get the course “Delivering 5 Star Customer Service”.

By Valentine Okolo