How to Calculate Sales Forecasting by Gerald Hanks - Updated September 26, Sales forecasting techniques use sales data from past years to predict a company's future performance. Sales forecasts allow companies to anticipate their revenues and plan for upcoming demand. These forecasts give business owners a keen understanding as to which products or services are selling well, which are selling poorly, and what times of the year each product or service performs at its best. The information gleaned from sales forecasts also helps companies allocate their internal resources, such as advertising, employees and storage space, for maximum potential profits.
Creating a sales plan A basis for sales forecasts Sales forecasts enable you to manage your business more effectively. Before you begin, there are a few questions that may help clarify your position: How many new customers do you gain each year?
How many customers do you lose each year? What is the average level of sales you make to each customer? Are there particular months where you acquire or lose more customers than usual? Existing businesses The starting point for your sales forecast is last year's sales. Before you factor in a new product launch, or an economic trend, look at the level of sales for each customer last year.
Do you know of any customers who are going to buy more - or less - from you next year? In the case of customers who account for a significant value of sales, you may want to ask them if they plan to change their purchase level in the foreseeable future. New businesses New businesses have to make assumptions based on market research and good judgement.
Every business can also add in the new customers that it expects to attract without actually knowing who they are, or what they will buy. Simply enter "new customer" on your forecast.
Depending on your type of business, you may want to specify the volume of sales in the forecast - for example, how many 3.
By knowing the volume, you can plan the necessary resources in areas such as production, storage and transport. Your sales assumptions Every year is different so you need to list any changing circumstances that could significantly affect your sales.
These factors - known as the sales forecast assumptions - form the basis of your forecast. Wherever possible, put a figure against the change - as shown in the examples below.
You can then get a feel for the impact it will have on your business. Also, give the reasoning behind each figure, so that other people can comment on whether it's realistic.
Here are some typical examples of assumptions: The market The market you sell into will grow by 2 per cent. Your market share will shrink by 2 per cent, due to the success of a competitor.
Your resources You will double your sales force from three people to six people, halfway through the year.A forecast can help you predict things like future sales, inventory requirements, or consumer trends.
The timeline requires consistent intervals between its data points. For example, monthly intervals with values on the 1st of every month, yearly intervals, or numerical . The sales forecast is the key to the whole financial plan, so it is important to use realistic estimates.
Divide your projected monthly sales into "Categories", which are natural divisions that make sense for your type of business. Learn how our HPI forecasting methodology predicts the future of real estate by using the most advanced machine learning algorithms and predictive analytics.
Create a monthly sales forecast for a three year period. Includes 5 default product categories (you can add more) and user input is limited to specifying the monthly sales volumes, selling prices and gross profit percentages for each product category. For example, a sales forecast may be based upon a specific period (the passage of the next 12 months) or the occurrence of an event (the purchase of a competitor’s business).
Stages of Forecasting. Forecasting sales is never a simple task, and the shaky economic recovery is making the process downright perplexing.