Planning and forecasting for the year ahead is a crucial process for any ecommerce brand. By setting clear goals and objectives, using data and analytics to inform decision-making, creating a financial forecast, and being prepared for potential disruptions, you can prepare and position your ecommerce brand for success in the coming year.
The importance of setting clear goals and objectives for the year ahead
Setting clear goals and objectives for the year ahead is of paramount importance, and cannot be overstated. It lays the foundations for the rest of the year and gives you and your team a clear sense of direction. This makes it easier for you to make informed decisions and allocate the resources needed for tasks effectively.
When setting goals, it’s crucial to be specific, measurable, achievable, relevant, and time-bound (SMART). For example, a SMART goal for a brand might be to increase online sales by 20% between the 1st of January and the 31st of March.
According to the Corporate Finance Institute, setting clear SMART goals and objectives give you a sense of direction and allows you to measure your brand's progress and determine whether you are on track to meet your targets. This helps you make any necessary adjustments along the way to ensure that you remain on track to achieve the desired result of the goal.
Additionally, having clear goals and objectives helps to motivate, inspire, and focus your team. Clear goals create a clear understanding of what is expected of them and the goals they’re working towards.
Are they worth setting? Do they really work? Yes. A study found that 76% of participants who wrote down their goals actually achieved them. This is 33% higher than those who don’t. Clear direction and something to work towards help keep you on track for success. (It’s also incredibly satisfying to be able to tick something off when you’ve completed it!)
So now that you’ve got your goals, how do you plan and forecast to achieve them?
How to use data and analytics to inform your planning and forecasting
Once any goals have been established, you can use data and analytics from previous years to inform your planning and forecasting for 2023. Analysing historical data will aid in identifying trends and patterns, which will therefore help you to make more accurate predictions about the year ahead.
For example, a brand that sells seasonal products might use data from previous years to forecast demand for its products in the coming year. When you look back at your data, do you see any spikes in demand or times when sales may have dropped off? You could leverage this information to work out when to run promotions or announce new product drops.
For example, Common Thread Collective suggest using the 'Four Peaks Theory' to stop sales dropping off and getting into cash flow issues. This focuses on running sales around and planning your marketing calendar around a specific event or cultural moment in Q1, Q2, Q3, and Q4 to leverage consistent growth throughout the year.
Additionally, businesses can use analytics to identify opportunities for growth and areas where they may need to make adjustments in order to achieve their goals.
For instance, a great forecasting process for growth via promotions is through analysis of existing customer base data.
Based on your cohort's previous behaviour you can work out an estimate of how many you expect to come back this year as well as an estimate of how much you expect them to spend. The gap between the amount that you expect them to spend and whatever your top line revenue target is for the year is what needs to be made up by customer acquisition. This gives you an idea of how much you would need to spend on acquisition and retention promotional strategies.
But all of this will inevitably cost you money, which is why you need a robust financial forecast.
What are the benefits of creating a financial forecast and how to do it effectively
What is a financial forecast?
Creating a financial forecast is another principal aspect of planning and forecasting for the year ahead. A financial forecast is an estimate of a brand's financial performance in the coming year, based on assumptions about sales, expenses, and other factors.
By creating a financial forecast, you are able as a business to identify potential challenges as well as opportunities, and then make plans to address them.
To create an effective financial forecast in simple terms, you should start by gathering data on your historical financial performance, including sales, expenses, and profits. They should also consider external factors that may impact their financial performance, such as changes in the economy or shifts in consumer behaviour.
With this information, businesses can create a projected income statement, balance sheet, and cash flow statement for the coming year. These documents can provide valuable insights and help businesses make informed decisions about their future financial performance.
Overall, the key to creating an effective financial forecast is to be thorough, accurate, and transparent in your approach. This will help to ensure that your forecast is reliable and can be used to support decision-making within your organisation.
How to plan for business disruptions
An event which highlighted the fragility of supply chains was the pandemic. The impact of the pandemic on businesses was, and in some cases continues to be profound, and it is important for brands to plan for further potential disruptions in 2023. Coupled with this, the conflict in Ukraine sees no real signs of slowing and the impact of this on the economy has been clear.
This in turn has affected consumer behaviour due to the rising costs of inflation and people, in general, having less money in their pockets.
One way to minimise the impact of disruptions and keep business running as smoothly as possible is to have contingency plans in place, such as backup suppliers for your key products and flexible policies in place for returns and refunds.
Another important step is to develop a solid communication plan so that you can quickly and effectively inform your customers about any changes or delays.
Additionally, having a strong online presence through social media and a well-developed website can help ensure that your customers can continue to access your products and services even if there are physical disruptions.
By planning ahead, you can minimise the impact of disruptions or interference and keep your brand running smoothly.
In conclusion, planning and forecasting for the year ahead is a crucial process for any ecommerce brand. By setting clear goals and objectives, using your historical data and analytics to inform decision-making, creating a financial forecast, and being prepared for potential disruptions, businesses can prepare and position themselves for success in the coming year. If you need help getting started with your planning and forecasting, our team of experts are here to help. Contact us today to get started!