Picture this: You own a gift shop in a bustling tourist area. You come in one morning to find that your best selling item is sold out! What’s worse, it’s a holiday, so there will be more visitors to the area than usual. You underestimated demand, and now you’re not only losing sales but possibly losing customers to your competitors.

If this sounds familiar, then you’ve experienced a stockout. Too often, retailers either don’t do forecasting or fail to do it properly. And that means lost revenue, lost customers, and likely a short lived business.

Retailers aren’t alone. Restaurants also need to regularly conduct forecasting to accurately gauge demand for their menu items. But unlike retailers, restaurants also have to contend with food waste, which happens when they order too much of an item and can’t sell it. According to Waste Managed, a waste removal firm, UK hospitality companies generate more than 900,000 tonnes of food waste each year.

Scenarios like these are both frustrating, but they are avoidable with the proper forecasting. Using reliable forecasting, businesses reduce the risk of financial losses and can also identify more opportunities to optimize their resources and deliver exceptional customer experiences.

If this is a new concept for you, you’ve come to the right place! Let’s take a closer look at what forecasting is and how retailers and restaurants can approach it to maximize their sales and profitability.

What Is Forecasting?

Forecasting is the practice of predicting future outcomes based on historical data and current trends. It’s more than just crunching numbers, though. It’s informed guesswork, a calculated bet that combines past performance, seasonal patterns, and market insights to anticipate demand.

For retailers and restaurant owners alike, effective forecasting is a key factor driving success. Done well, it optimizes inventory, staffing, and customer satisfaction. Done poorly, it leads to lost sales, wasted resources, and frustrated customers.

Understanding the nuances of forecasting is critical, whether you’re calculating daily demand for staples like bacon and cigarettes or planning ahead for seasonal products like special holiday meals or Cadbury mini-eggs. Too much stock can mean discounts and waste, while too little risks turning customers away.

Getting the Data Right

Effective forecasting requires gathering sales data, analyzing comparable periods, and extrapolating trends. However, getting the data right is a key step that many retailers and restaurant owners overlook.

One common pitfall is relying solely on historical data without considering all the factors that may impact demand patterns. Unusual weather events, construction disruptions, or changes in school holiday schedules can create variances that skew sales figures. For example, a surprise cold snap in July might drive more people to a local coffee shop, but that doesn’t mean more people will come get coffee every time it gets cold out.

To generate the most accurate forecasts, it’s a good idea to mark down on the calendar any unusual events or situations that might have had an impact on sales that day. That will enable a shop to base predictions on more complete information, leading to more accurately stocking products.

Another frequent issue is failing to differentiate between seasonal and year-round products in their analysis. Comparing unrelated time frames—such as a restaurant’s special holiday sales to an average week of sales—can lead to inaccurate forecasts. Internal factors, like promotions or discounts, are also often overlooked. Businesses may see spikes in sales without realizing they were promotion-driven, causing them to overestimate future demand. Properly categorizing and contextualizing data, while accounting for both internal and external influences, is essential for making reliable predictions and avoiding costly errors.

5 Steps to Creating Accurate Forecasts

Accurate forecasting is an essential part to running almost any type of business. Here are five steps every business can take to ensure accurate—and therefore useful—forecasts.

Step 1: Gather and Analyze Data
Collect historical sales data, focusing on comparable periods (e.g., previous month, same period previous year) to identify trends and recurring patterns. Include details like full-price sales, discounts, and waste, along with any anomalies such as promotions or unusual events.

Step 2: Account for External and Seasonal Factors
Adjust your data for temporary disruptions (e.g., weather, school holidays) and seasonal trends. Separate year-round staples from seasonal products to ensure accurate forecasting for each.

Step 3: Calculate Growth and Demand
Estimate future sales by analyzing growth rates and comparing similar time periods (year over year, monthly, weekly, daily). For seasonal items, adjust based on annual comparisons. For staples, use weekly or monthly data.

Step 4: Factor in Practical Constraints
Plan for inventory storage and ensure you have adequate staff to meet forecasted demand. Consider physical space, pack sizes, and staffing requirements to avoid operational inefficiencies.

Step 5: Validate and Adapt
Regularly compare forecasts to actual sales and update your predictions based on new data. Reflect on successes and errors to continuously refine your approach.

As  you can see, creating an effective forecast is an essential part to running a successful business, but it’s also complex and sometimes confusing. But it doesn’t have to be.

A good EPOS system can simplify the process, turning guesswork into actionable insights. By automatically tracking sales trends, seasonal patterns, and inventory levels, these systems provide a solid foundation for accurate predictions. Whether you’re managing staples like bacon or planning for seasonal spikes like Easter chocolates, EPOS systems ensure you’re equipped with the data to make informed decisions.

If you want an EPOS system that can take the guesswork out of forecasting, we can help. Contact Everything EPOS’s experts to discuss your forecasting needs and how our systems can help you reduce waste and grow your business.