Business forecasting takes a lot of time and effort; however, it is definitely worth it. These 10 reasons will show you the advantages of forecasting in business and why you should take the time to implement great forecasting tools.
Business forecasting is a critical step in the creation of any business plan. Forecasting is almost never completely accurate but it helps companies look at the big picture. Here we look at 10 advantages of forecasting in business. We will use the wine industry to provide examples of how forecasting can truly benefit a business.
1. Helps to Predict The Future
Forecasting does not provide you with a crystal ball to see exactly what will happen to the market and your company over the coming years, but it will help give you a general idea. This will provide you with a sense of direction which will allow your company to get the most out of the marketplace.
Predicting the future in the wine industry can be very difficult. But by doing so, a winery can predict future trends and then change their company objectives to achieve success in this new environment.
2. Keep Your Customers Happy
In order to keep your customers satisfied you need to provide them with the product they want when they want it. This advantage of forecasting in business will help predict product demand so that enough product is available to fulfill customer orders.
By using business forecasting to look ahead, wineries are able to make sure they always have product available for the customers to purchase. If the shelves are bare for any length of time, a customer is extremely likely to try another brand.
3. Learn From The Past
Looking at what has happened in the past can help companies predict what will happen in the future. Thus making the company stronger and most likely more profitable.
Wineries look at past sales and trends and use that data to try and predict the future.
4. Keeps Companies Looking Ahead
By forecasting on a regular basis, it forces companies to continually think about their future and where their company is headed. This will allow them to foresee changing market trends and keep up with the competition.
Wineries have to keep looking ahead or else they will not be able to meet demand. Giving their competition even a slight advantage could be devastating.
5. Save on Staffing Costs
One of the advantages of forecasting in business is that it allows companies to predict how much product will need to be produced to meet customer demand. From here a company can use this data to accurately determine how many employees they will need to have on hand to meet the required level of production.
Many wineries have fairly small profit margins, so it is important to make sure they have the correct amount of staff on hand and are not employing too many people.
6. Remain Competitive
A business that does not use forecasting techniques will likely succumb to their competition in a short time. Having a general idea of what sales to expect in the following period is very important. This will help a company prepare to meet customer demand, otherwise the customer will look to fulfill their needs elsewhere.
The wine industry is extremely competitive. There are literally thousands of different wineries fighting for the same shelf space. Attracting new customers with expensive advertising campaigns and flashy labels is very costly. That is why once a company gets a new customer, they want to do everything in their power to keep them.
7. Receive Financing
In order to receive financing for new startups or to fund an existing enterprise, a forecast will need to be completed. The lender needs an estimate on the number of sales you will have within a given time period before they will consider lending out large sums of money.
Financing is a key component of success for most wineries. Most have loans on their buildings, equipment, and vineyards. Without this financing, they would more than likely not be able to operate so this is an essential advantage of forecasting in business.
8. Reduce Inventory Costs
Forecasting helps predict how much inventory should be on hand at any given time. By having the right amount of inventory, your company will be able to save on warehouse and transportation costs. There will also be less risk of incurring obsolescence costs or having to discount products because you have a large surplus.
Having the correct amount of inventory on hand is very important for every winery. White wine can only be kept on the shelf for a couple of years. That is why it is extremely important to make sure there is not a large surplus of product.
9. Helps Prepare for a Drop in Sales
A drop in sales is never a good thing for a company, however, this advantage of forecasting in business reveals sales drops which in turn, can be recognized and dealt with quickly. Learn how to create a sales forecasting spreadsheet in Excel right here on Bright Hub.
When a winery has forecasted a drop in sales they will slow down production. This means having less wine in their tanks or barrels at any given time, and also less finished goods inventory on hand at their various facilities.
10. Prepare for New Business
By forecasting demand, a company can see if an increase in sales is likely imminent. This will allow the company to prepare for this increase in business by providing extra staff or production facilities to meet this new level of demand.
Wineries will increase wine production and bottling to meet this new demand and hopefully gain life long customers in the process.