Sales Forecasting: The Next Best Thing to a Crystal Ball; Practical Tips to Maximize Revenue Potential; Unique Selling Proposition (USP) as a Competitive Edge; Is It Time to Raise Prices?

Sales Forecasting: The Next Best Thing to a Crystal Ball
Practical Tips to Maximize Revenue Potential
Unique Selling Proposition (USP) as a Competitive Edge
Is It Time to Raise Prices?

Sales Forecasting: The Next Best Thing to a Crystal Ball

No one can predict the future with 100 percent certainty, but intelligent forecasting models can help small and medium-sized businesses (SMBs) do a better job of planning for it. That’s important in all kinds of economic conditions and critical in uncertain ones. Depending on the kind of business you run, there are three forecast categories that may be important: unit sales, sales revenue, and net profit.

One of the best tools available for forecasting unit sales is historical data. Analysis of past performance can help SMBs determine their traditional sales cycles, (i.e., which months tend to show the strongest performance, which the weakest, etc.). Applying current and anticipated changes to the marketplace, your business and your customer base can help you formulate more accurate projections of what future unit volume is likely to be. However, while this model is good for forecasting sales activity, it is of limited usefulness in projecting future revenue if your business also has other revenue streams—rebates, investment or rental income, contracted periodic payment plans, etc.

“For companies that have fairly strong and steady profit margins, and for most service businesses, a sales revenue forecast is all you really need,” suggests Dave Kurlan, founder and CEO of Objective Management Group and author of Baseline Selling: How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. However, SMBs involved in the manufacture and/or sale of products will need a unit sales forecast to compute their sales revenue projections. The two main approaches to sales forecasting are quantitative and qualitative (judgmental), and many businesses use both simultaneously.

In its simplest form, the formula for a quantitative sales revenue forecast is past sales plus percentage of inflation factor. More detailed approaches factor in aggregate totals of market demand, gross national product, disposal income levels, total number of buyers in the market, and other relevant numbers. Since most businesses must consider a variety of external and intangible factors, they also do qualitative forecasts. This method is also preferred for companies that lack sufficient historical data, especially new businesses. Examples of external/intangible factors include seasonality, general economic conditions, level of competition, political events, supply issues, and styles or fashions.

Net profit forecasts are useful in planning budget changes, and they are particularly important for companies with variable margins—especially for those with short margins, Kurlan says. In its basic form, the formula for net profit forecasting is all costs of doing business—product, personnel, operational overhead, etc.—subtracted from revenue generated by sales. Dividing that number by unit sales gives you profit-per-unit, and you can use that figure to estimate future profits by applying it to your unit sales projection.

“Unfortunately, most forecasts come in two sizes, late and wrong,” Kurlan quips, placing the blame on unreliable sales-pipeline data. He suggests having an expert develop a customized, staged, criteria-based sales pipeline that forces your salespeople to accurately place each opportunity into the proper stage. “With an approach that couples actual sales criteria met with built-in confidence ratings, you can accurately predict which business will close, when it will close, and for how much,” he says.

Inc. Resource: Sales Forecasting Model

This downloadable Sales Forecasting Model form can be used by companies to predict future sales based on past sales performance and an analysis of expected market conditions. The Sales Forecasting Model is used to organize data that will be used to analyze future sales. This form is customizable to fit your company’s specific needs.

Learn more >

Practical Tips to Maximize Revenue Potential

In a constrained environment, where organizations of all sizes are being pressed to find ways to do more with less, maximizing revenue streams is a top-of-mind consideration for many SMBs. Any incremental revenue is generally welcome, as long as the cost of generating it doesn’t exceed the additional volume it contributes. But extra revenue that can be wrung out of existing fixed costs is most valuable because it tends to flow straight through to the bottom line. Here are some practical suggestions to help maximize your business’s revenue opportunities:

• Learn to use social media. Roeder Consulting, a Cleveland-based project management consulting and training firm, became the number one-ranked group for online project management training in the LinkedIn social network by sparking discussions that are relevant and applicable to real-world situations in its industry. “Social media levels the playing field for companies with a great product or service,” says Tres Roeder, the company’s founder and president. “Any small business can use social media as a tool to get the word out.”
• Add new sales channels. Retailers with a brick-and-mortar presence and manufacturers relying on traditional distribution chains such as sales reps can leverage the Internet and expand into global markets via e-commerce. The proliferation of online auctions sites and Web-based closeout retailers is creating new opportunities to dispose of excess inventories, often on more favorable financial terms than were available in the past.
• Get more from the customers you already have. It is less costly to get existing customers to buy more than it is to find new ones, and repeat customers spend more, on average, than new ones. Anything you can do to build customer loyalty has the potential to drive revenue growth. Simple strategies for boosting average transaction amounts include upselling, adding products and services that are complementary to those you currently offer, staying in touch with your best customers, and offering incentives for referrals. For more tips in this area, see “10 Ways to Get More Sales From Existing Customers.”
• Leverage technology. Technology makes it easy to utilize outsourced vendors to handle things outside your business’s core competency, freeing up resources that can be devoted to increased revenue generation, says Lance Reese, president of Silver Peak Consulting, based in Idaho Falls, Idaho. “It is easier than ever before to find qualified companies to handle areas of your business such as payroll, sales tracking, e-commerce, and many others. If you are contemplating hiring people to facilitate a new department, look first to see if someone else can do it for you cheaper and better,” he advises. Webinars are another technology-driven tool that can drive demand and help maximize revenue potential. “A free webinar provides customers with a zero-risk way to see you in action and become comfortable with your brand,” says Roeder. “This makes them more likely to use your products and services.”
• Minimize tax liabilities. It’s important to pay whatever taxes you owe, but it’s just bad business to pay more than you have to. Many small businesses fail to take advantage of all the tax deductions and credits available to them simply because they don’t know about them. Seeking the assistance of a qualified tax professional can more than pay for the cost of those services.

Unique Selling Proposition (USP) as a Competitive Edge

To capture a larger share of market and become more viable, sustainable, and profitable, you absolutely must differentiate your business, products, and/or services from your competitors. In other words, you need to make your business special in the eyes of your customers and prospects. You can achieve that by creating a “unique selling proposition,” or USP, and then effectively conveying it to your target. Virtually all businesses can benefit from a good USP, but it’s crucial for those operating in a highly competitive market.

A USP was shown to be 81 percent more effective than a general sales campaign in a recent proprietary research study with more than 4,200 companies and their senior executives, conducted by Stevens Consulting Group. “USPs is so successful because they provide instant attraction based on two things: emotion and value,” says Drew Stevens, president of the Eureka, Missouri-based consulting firm. “The USP provides something memorable that prompts others to speak about you. The market wants to hear from your customers proclaiming your benefits, not from you.”

A USP is also a memorable promise about your brand and what it delivers. If you think about it, you can probably reel off four or five examples of USPs that continue to keep their brands front-of-mind with consumers:

• BMW: “The ultimate driving machine.”
• Domino’s Pizza: “You get fresh, hot pizza delivered to your door in 30 minutes or less—or it’s free.”
• Federal Express: “When your package absolutely, positively has to get there overnight.”

Gail Bower, president of Philadelphia-based Bower & Co. Consulting, suggests a three-step approach to creating an effective USP:

1. Identify the business or personal outcomes that result from the use of your company's products or services.
2. Evaluate the experience of your brand. Does it truly make your customers’ lives better? Is it easy to do business with your brand?
3. Create experiences—online, in person, through marketing—that bring this value to life in emotionally resonant ways.

Elements to consider in formulating your USP include any superior alternative you offer at a price customers are willing to pay, verifiable positive outcomes resulting from the use of your product or service, and information that demonstrates understanding of your customer’s needs/requirements. Avoid elements that are ego-driven, fail to communicate outcomes or why your business is the superior choice, or don’t quantify the customer’s problem or your solution.

Is It Time to Raise Prices?

The turbulent state of the economy during the past several years has raised many challenges for small and medium-sized businesses. A confounding one is whether to raise prices. A competitive marketplace and increasingly price-conscious customers may make you hesitate to do so, but sacrificing margin by forgoing a justifiable price bump can be a big mistake.

To make intelligent decisions about price increases, you need to set them appropriately in the first place. Initial prices should reflect your brand’s value. For products, that includes quality, performance, packaging and, in some cases, on-time delivery and follow-up service. Pricing for service providers should reflect the experience level of the provider, impact of the service on the customer’s life (for B2C businesses) or business (B2B), timeliness of communications, and ability to meet the customer’s schedule.

Consider using several different models to set prices:

• Costing involves calculating direct and indirect costs to determine a per-unit break-even point and choosing an acceptable profit margin to set the unit price.
• Competitive pricing involves looking at what your existing competitors are charging for the same products or services and adjusting your own prices up or down as indicated.
• Position pricing involves intangible factors, (i.e., how you want to be perceived by customers and prospects). If you are aiming for high-end positioning, your prices should be set higher; if it’s a budget image you’re looking to project, take lower margins and aim for higher volume.

One factor that might justify a price bump is a significant increase in your own direct costs. However, Leanne Hoagland-Smith, a Chicago-area executive coach and author of be The Red Jacket in a sea of gray suits, warns that price goes with value, not necessarily with economic conditions. She counsels weighing all the risks—loss of market share vs. loss of profitability, impact on customer loyalty, etc.—when considering any price change.

Productivity@Work Resource

Cloud Computing—Is It Right for You

Most businesses are already familiar with one aspect of cloud computing: software delivered over the Internet. Think of it as renting vs. buying your software. Many small businesses simply use the "cloud" to host productivity applications, such as e-mail, document creation and sharing, and calendars, relieving them of the time and expense needed to run and maintain the software on their own computers.

This paper focuses the Software as a Service (SaaS) as a subset of the entirety of cloud computing. For example, some businesses don't just use software services—they buy computing power from vendors, much like buying power from a utility, to augment their existing capacity. We'll explore the benefits of could computing in this setting, including lower administrative costs, improved utilization of resources, paying only for what you use, and more.

Read "Cloud Computing—Is It Right for You?". In addition, you can learn more about the Microsoft cloud computing resources available through Comcast Business Internet.

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