Sales forecasting is one of the best things that the company does, especially in real estate. Accurate predictions of future sales keep leadership happy, your business healthy, and your sales team, like real estate agents, involved.
Since sales are the backbone of any business, it helps to have a general idea of what to expect in the near future. This will assist in the process of making educated and purposeful sales decisions.
The Importance of Sales Forecasting
Real estate agents need to be able to make accurate predictions about how much they will sell in the future. They can make educated guesses about future market trends by analyzing historical data on sales, which gives them an advantage over competitors. Using this information, one can accurately price real estate, select the best areas in which to make investments and figure out the optimal number of properties to put up for sale.
In an unpredictable market, having accurate sales projections can mean the difference between success and failure for a business. Real Estate agents have access to a variety of tools that can help them predict sales, but they shouldn’t put too much weight on any one of them. The most successful real estate broker and agents use different methods to get the most complete and accurate picture of the possible market.
Real Estate Agents Should Consider Before Forecasting Sales
Gather your team
The process of figuring out what sales will be like in the future is planned and includes people from many different business functions. Most of the time, your sales staff will be asked to take part, but other departments also need to be in sync with the forecast.
- Finance Department. They maintain historical data concerning previous expenditures and sales results. These numbers are important to have before beginning the process of quantitative forecasting.
- Marketing Department. They can give helpful information about things like market trends, current marketing strategies, buyer behavior, audience targeting, and how people see the brand. With these details, you can get a better idea of how likely it is that a prospect will become a customer.
Operations Department. They know more about how customers order from the company and how they feel about it. Their regular interactions with customers give them an intuition about what will probably happen in the future.
Analyze the market dynamics
Real estate agents who want to stay ahead of the competition need to understand how the market works. By understanding how the market is changing, you can adjust your strategies and tactics to stay ahead of the curve.
When figuring out how the market works, you need to look at several things, such as the state of the economy, interest rates, population growth, and changes in demographics. By monitoring these indicators, you can get a sense of where the market is headed and make adjustments to your business accordingly.
Failure to assess market dynamics can lead to missed opportunities and lost business.
Types of Sales Forecasting Methods for Real Estate
Bottom-up Sales Forecast
To come up with these projections, you must first estimate the number of units you will sell and then multiply that number by the typical selling price of a unit. If you run a bigger small business, you may also want to include things like the number of locations, real estate brokers and agents, or online interactions.
The idea behind a bottom-up sales forecast is to start with the most fundamental aspects of the forecast and then work your way up from there. The benefit of using this kind of forecast is that it is simple to modify the projection if any of the variables, such as the price per unit or the number of real estate brokers and agents, are altered.
Top-down Sales Forecast
Start with the total size of the market and figure out what percentage of the market the business can get.
For instance, if the total size of a market is $50 million, a company may estimate that it can capture 10% of that market, which would result in a sales forecast of $5 million for the coming year.
It is a good idea to ask an advisor to provide a reality check on the percentage of customers in your market that you can reasonably expect to attract and serve if you are a natural optimist.
It is essential to use both of these approaches when attempting to forecast sales. You should start with a top-down method and then use a bottom-up method to figure out if your first estimate is realistic or not. You could also do the two methods separately and see how well they match up with each other. Both types of forecasts should be performed by businesses, and then both types of forecasts should be adjusted until they produce the same number. This will ensure that the forecast is as accurate as possible.
How to Make A Sales Forecast for Real Estate Agents and Brokers
Once you have your team put together, you should make sure that everyone is aware of their specific role, and you should keep them updated. Then, proceed with the steps as follows:
Conduct research on the market
For real estate brokers and agents to make accurate sales predictions, they need to research the market. By looking at how the real estate market is changing over time, they can better predict how demand will change and change their strategies accordingly. Market research can also help people who work in real estate find new opportunities and stay ahead of the competition.
There are several different methods that real estate brokers and agents can use to conduct market research. One popular approach is to survey buyers and sellers about their thoughts on the market. Brokers and agents can also look at data on home prices, sales, and foreclosure rates to get a sense of where the market is heading. Additionally, they can analyze demographic data to see which areas are growing or shrinking. No matter what approach they take, real estate brokers and agents need accurate information to make good business decisions.
Gather the Information You Need
As real estate brokers and agents, you are in a unique position to provide useful information about the real estate market. Your knowledge of the local market and your expertise can help you make a realistic sales forecast for your clients.
To make an accurate forecast, you will need to look at recent sales, current inventory levels, and what you think will happen in the market. You should also consult with other real estate professionals in your area to get their perspectives on the market. By analyzing all of this data, you can develop a realistic estimate of how much the property will sell in the coming months. This information can be invaluable for clients who are looking to buy or sell real estate.
Decide on your sales forecasting Technique
Both qualitative and quantitative approaches can be utilized when making sales projections. Decide whether you will use one of these methods or both of them. Sometimes, the method will depend on what data you have.
Two Sales Forecasting Techniques
Qualitative Sales Forecasting
When figuring out how much a house is worth, many real estate brokers and agents use qualitative sales forecasting. Qualitative sales forecasting is based on judgments and opinions rather than on hard data.
In other words, it is a method that is based on the knowledge and experience of the real estate agent. It is often seen as a more accurate predictor of future values.
Real estate brokers and agents can estimate how much money a property could make with the help of a quantitative sales forecast. Brokers and agents can make a more accurate estimate of how much money a property is likely to bring in by taking into account things like its location, size, and amenities.
Quantitative sales forecasting can also help find problems with a property that could hurt its ability to make money. By understanding the factors that influence a property’s revenue, brokers and agents can help their clients make more informed decisions about whether to buy or sell a particular piece of real estate.
Monitor Your Competitor
You should still think about your competitors’ products and campaigns, especially those of the big players in the market. Also, do some research to find out if new companies are planning to get into your market.
Sales Forecasting Software
There is some software available that can assist you with sales forecasting, and you can use that software.
Sales Forecasting Software
Using data from the past and trends in the business, sales forecasting software can make a report on expected sales revenue. Reports on the forecast can make a comparison between the sales goals and the actual sales.
In an ideal world, your sales software would help you find answers to questions like:
- How many sales can real estate brokers and agents make?
- Which method of forecasting creates the most accurate projections for your company and why?
- How did actual sales compare to expected sales?
Sales Pipeline Forecasting
The sales pipeline forecasting software you use will give you an analysis of the opportunities that are currently available and a calculation of how often you have been successful in pursuing those opportunities. This will help you prioritize your efforts. This method emphasizes pipeline management and computes a historical win rate percentage by taking into account factors such as the opportunity’s value and age, as well as the real estate brokers and agents who are working on it.
Some software programs include features that will either help you save time by letting you integrate information from third-party sales software, for example, or give you the ability to view pipeline activity and internal sales data. Using software such as QuickBooks, Salesforce Sales Cloud, Zoho CRM, or Pipedrive, you can create sales forecasts.
Historical Sales Forecasting
When using software to do historical sales forecasting, the goal is to look at how well a company did in the past so that a mean (or average) level of sales can be predicted for the next month, quarter, or year. It places a strong emphasis on historical trends as well as the seasonality of products and services sold, but it does not take into consideration the opportunities that are currently in your pipeline.
This software works best for smaller businesses that don’t have a lot of changes in their monthly sales.
Because growth and success in business depend on knowing when and how to take risks, your real estate agents and brokers must be up-to-date on the tools that will assist them in accomplishing their objectives. The sales forecast can be that crucial difference between growth and stagnation by giving accurate information regarding how much revenue you need per month as compared to expectations, which may lead people down false paths and cost more time than is necessary. The difference can be the result of the sales forecast.