The Importance of Sales Forecasting Methods
Wouldn’t it be wonderful if you could have a crystal ball into your restaurant's future to see the sales that will come in? Think of all the planning you could accomplish - you would know how much staff to schedule, how much inventory to have in stock, and what you should put in place for marketing. The next best thing to a crystal ball is implementing sales forecasting methods.
How do sales forecasting methods help you see into the future? Looking at your past sales will help you predict your future sales as well as set goals for your restaurant's future. It will determine how many labor dollars you have to schedule with as well as how many dollars are available to spend on Cost of Goods Sold, such as food and liquor. To start this process, you need to track sales and sales influencers to the last decimal point. Every cent that comes into your restaurant, you need to know where it came from and how you can attribute that sale.
While sales forecasting methods are mostly stats and science, there is a dash of experience that is required to pull this off as well. You need to understand how the stats work together and where they came from. For instance, you need to evaluate each individual menu items performance on a regular basis to be able to adjust your menu based on people’s expectations and flavor trends. Combining your experience with a great forecast will ensure that your budgets and sales goals are being achieved. Since the fortune is in the forecast, here are our tips on how to successfully perform sales forecasting.
Start with Tracking Everything
It may seem like you should only focus on tracking sales when you start your sales forecasting methods. After all, “sales” is in the name of the strategy! However, there are so many different things in your industry that will affect your sales. The items you should be tracking include:
- Daily Sales: Of course you should start your sales forecasting methods by tracking your daily sales. The more you know about the sales you are getting, the better your statistical data will be. Ideally, you want to break down every cent that comes into your restaurant to a particular menu item. You will be able to see what dishes are doing well and which are doing poorly. From there, you can use your experience to decide if the dish needs to be revamped or if the price point is too high.
- Local Events: The events that are going around your restaurant will affect your traffic and therefore your sales. If kids are out of school, families are more likely to eat out as a special treat. If there is a St. Patrick’s Day or Thanksgiving Parade nearby, people are likely to come to your restaurant afterwards. Or if there is a large sporting event happening in your area, like the World Series we experienced in 2015 at our Kansas City headquarters, people will often plan to stop and eat before or after the game. Keep track of these events so you can see if they affected your sales. There are several online local event sites. Check out what is happening on your local scene at eventful.com.
- Local Weather: Everyday as you keep track of your sales, you also need to keep track of what the weather was that day. Severe storms, snow, or excessive ice will stop your sales in their tracks. Make a note of the weather each day so you can attribute otherwise unexplained low or high sales. Use an online service like ShiftNote to help you track and archive your locations weather to better assist you in your sales forecasting methods.
- Marketing Events: Every marketing initiative you launch should be tracked along with your sales. If you run limited time offers in coupons or on social media, make a note of the offer and the duration it was advertised. You should also track any radio ads or other paid advertisements that you create and implement. Track how much you spend on the ad and the duration so you can track your return on investment with the sales you received from that advertisement. Not only can you attribute sales to your marketing events, but you will be able to know what works well and what doesn’t. Check out these 5 tips for growing event sales.
- Banquets and Catering: When you have a large party book a private room in your restaurant, or when you send your catering staff out to a guest’s event, you need to track these as part of your sales forecasting methods. A spike in your sales during this period will give you insight into the effectiveness and return on investment for these large parties.
When you begin tracking all of these things, you will be able to create a map of how your sales arrived. This will allow you to narrow down on exactly what is working and what is not, as well as fine tune your future sales goals with concrete data.
Begin Your Sales Forecasting Methods
Now that you have been tracking your daily sales, local events, local weather, marketing events, and your banquets and catering, you can begin your sales forecasting methods. Start by looking at trends for the past six weeks to see what your weekly sales average is. You can also use this six week data to narrow in on specific parts of your sales averages. For instance, look at what the average sales are on Mondays to see if there is a consistent trend. Focus on your highs and your lows to find out why they occurred. This is when you will need to look at all the details of your tracking - weather, events, marketing, etc. Break down the shifts in your sales and try to attribute it to something specific.
After you complete your past six weeks analysis, then you can look at the same period in the previous year. Go through the same exercise for last year’s six week period. From there, compare the sales trends with last year’s, last month’s, and last week’s sales to get a big picture view on problems your restaurant is having as well as what is making you successful.
Plan Your Restaurant’s Future Based on Your Sales Forecast
Now you have a bunch of data and experienced analysis constructed. With all of this information, decide if you are going to do anything different this year that you didn’t do last year. Whatever you decide to change, try to back it up with the data that you have gathered by comparing this year to last year. Any decision you want to implement, think about how it will impact your sales +/-.
You will also need to do research on future events that are taking place nearby your restaurant during the time frame you are forecasting. Look at when school will be out and any major events that are coming into town. For immediate forecasting, you will also need to check the weather forecast.
How to Control Labor Costs with Sales Forecasting Methods
Not only will knowing about an increase in your restaurant’s traffic help with inventory, but it will more importantly help with scheduling employees. You don’t want to overspend on labor costs thinking there will be more traffic when your hard data says there won’t be. When there are trends of low sales on certain days, or during certain periods of time, you can bet you will not need as many employees to be on shift. Likewise, your data will tell you when you need more employees on shift to meet demand, ensuring fast and excellent customer service that will help maintain future sales. Labor costs can often be a killer of sales when you don’t know how to look at both hand-in-hand.
It may not be a crystal ball, but putting the time and effort into tracking every sale and the factors that affect it will give you incredible insight into your future. Be specific about attributing your sales and understand how to schedule employees to control your labor costs. Doing this with your sales forecasting methods will allow you to use this valuable data to make decisions that will increase your future sales and keep your operation growing for years to come.
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