There are numerous types of forecasting out there and one of the most common is called demand forecasting.
This type of forecasting is important because you need to predict the needs of your customers. That way, you can meet them without spending an excessive amount of money by paying people who aren’t needed or stocking up on inventory that is not necessary.
Unfortunately, there are also a lot of mistakes that people make when they are trying to forecast demand. When you are forecasting your demand, you are not expected to be perfect. On the other hand, you do want to get relatively close. If you have enough to leave time, you can plan accordingly.
What are some of the most common mistakes that people make when they are trying to forecast demand?
1. You Limit Your Forecast to Incremental Change
One of the most common mistakes that people make is limiting their demand forecasting to include only examples of incremental change.
When you are looking at spending, revenue opportunities, demand, or supply, you may miss major changes in the market. Instead, you need to take a step back and make sure you can see the entire picture.
How come you think differently to influence tomorrow? What are some of the biggest changes that are taking place in the industry? That way, you can plan for major changes as well as small changes.
Even though you may think that only incremental changes are going to take place, you don’t want to be blindsided by something significant that happens in the market.
2. Missing Out on a New Competitor in the Marketplace
Another common mistake that people make when they are forecasting demand is they forget if there is a new competitor in the marketplace.
Ideally, your company is going to be all of its competition. On the other hand, there are situations where a new competitor could take a bite out of your business. If that is the case, you need to plan for this accordingly.
You may need to scale back your inventory, customer service agents, or business contracts to accommodate for this. Otherwise, you are going to spend too much money without a lot of customers to serve.
You need to understand how a new competitor is going to impact your position in the market. That way, you can plan accordingly.
3. Forecasting Directly to the Goal
Of course, you probably have goals that you would like to meet. On the other hand, things can change from time to time.
You are probably held accountable for certain metrics that you have to meet. Therefore, you may subconsciously try to find ways to get back to those metrics without changing your behaviours.
If you are forecasting a specific goal, make sure that you are not creating a false sense of confidence. Otherwise, you could be surprised if you fall short of that goal. Of course, it would be nice if you met all of your goals. In contrast, make sure that you are not biased in your predictions.
4. Think Carefully About Your Forecasting Process
These are a few of the most important factors that you need to consider if you are trying to forecast demand. It is easy to make mistakes during your forecasting projection. Of course, nobody expects your forecast to be perfect. On the other hand, you do want to be as close as possible.
If you think about these mistakes ahead of time, you can avoid them. That way, you may be able to increase the accuracy of your demand projections down the road.
5. Being stricken by Data Analysis
You should know that if you use convoluted sources of data and manual procedures to coordinate out-of-date data and disjointed spreadsheets, your predictions would not only be misleading but also a pain to maintain.
And if all applicable data is present (somewhere), spotting any problems that need to be flagged would require a highly qualified eye. Professional demand forecasting software may assist.
6. Lack of market validation
Market validation is one of the key points for the successful forecasting of a business.
On the other hand, you can never know everything about the market nor can you keep studying the market validation techniques and put aside the idea of forecasting your business or even launching a new product or service.
So, in such a case you need to set a specific audience whom you need to target or a specific group of people and plan your strategy accordingly, only then market validation is possible since the business targets and takes feedback from its targeted audience.
7. Lack of prediction
No matter how unique or interesting the product is, it is going to take time for the audience to accept it and make it a part of their lives, so predicted steps are very important in the initial days of forecasting a business.
When prediction meets achieving some specific targets a huge glitch happens that’s because the startups and companies want to reach a specific target which someone helps to boost companies’ performance.
But on the other hand, you need to incorporate the new changes and reforms the customer acquires from the company and how the process of forecasting the new business and making a place in the market is still in progress.
In this initial period, everything is not about reaching a specific target but to build the brand’s image and achieving customer satisfaction.
8. Ignoring operational efficiency
Focusing only on numbers is not important when you want it to last longer with a stronger brand image.
Just increasing the production would not help since in the initial days you need to develop a relationship with your customers so that they come back for both products and services both. For this purpose, improving and working on operational efficiency is the most important.
9. Lack of documentation
No matter how small or big the mechanism you run is, you need to have proper documentation for everything. For this, you need to apply all your institutional knowledge and make updated documents for every department.
Plans do not work unless executed properly, for the proper execution of plans you need to write down all the assumptions and ideas proposed from every platform, be it social media platforms, websites or meetings, written to-dos are always better.
With the help of proper documentation, you will be able to justify even the smaller steps with dates and proper references.
10. Lack of communication
The inter-relation and interaction between the departments are very important so that everything sinks with each other and is done on time.
The sales team, operation team, and marketing team need to be on the same page to avoid missed commitments and misunderstandings with the clients. The best thing that can help is owing to the duty and checking up with the related departments on and off.
If that seems difficult, then technology can help, you can connect through different platforms online and clarify everything immediately. The use of technology in this department will also help in reducing the time to calculate but to analyze stuff and provide problem-solving solutions.
This online connection will enable the company to process the important things and not get lost in metrics, numbers, and documentation. Sod communication is the key to successfully forecasting a business.
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I am Adeyemi Adetilewa, a media consultant, entrepreneur, husband, and father. Founder and Editor-In-Chief of Ideas Plus Business Magazine, online business resources for entrepreneurs. I help brands share unique and impactful stories through the use of public relations, advertising, and online marketing. My work has been featured on the Huffington Post, Thrive Global, Addicted2Success, Hackernoon, The Good Men Project, and other publications.