4.05 Sales Forecasting

4.05 Sales Forecasting

By Shamika Archer

The Basics of Sales Forecasting

Sales Forecasting

Open Ended

When I hear forecasting, I think......

Sales Forecasting Bascis

A sales forecast is a prediction of what a firm’s sales will be during a specific future time period. Sales forecasts can be short-term, intermediate, or long-term in nature. Business managers and owners use sales forecasts frequently when making plans for their businesses. Sales forecasts help them to determine:

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How much to buy

What new items to offer

How many workers are needed

What prices to charge

Whether promotion is needed

Also known as the build-up approach, the sales forecast is prepared by starting with separate forecasts for specific products, salespersons, territories, etc. Then, these individual forecasts are combined into a forecast for the entire company

Bottom-Up Approach

Also known as the breakdown approach, the sales forecast is prepared for the company as a whole. Then, the forecast is broken down into forecasts for specific products, salespersons, territories, product lines, departments, etc

Top Down

Types of Sales Forecasting

Quantitative methods of forecasting sales are based on the results of gathering and analyzing all kinds of numerical market data.

Quanitative

Qualitative, or judgmental, forecasting methods are based on expert opinion and personal experience.

Qualitative

Types of Sales Forecasting (continued)

Open Ended

What do you think businesses need to complete a sales forecasting?

Sales Forecasting:

The Process

​4. Add outside predictions of increases in sales for your trading area from positive economic forecasts, population growth, reduced competition, etc.

1. Gather the data

2. ​Determine the amount by which your sales increased or decreased last year.

3. ​Determine the percent of increase or decrease.

Sales Forecasting Process​

6. Convert your final forecast percentage into a dollar figure.

5. Subtract outside predictions of decreases in sales from negative economic forecasts, reductions in population, increased competition, etc.​

Sales Forecasting Process continued...​

Let's Test Your Knowledge, Which Q?

Multiple Choice

New Image Hair Salon hires a firm to conduct a survey to determine the frequency of salon visits

• Quantitative

• Qualitative

Multiple Choice

Observation of current trends is helpful in sales forecasting

• Quantitative

• Qualitative

Multiple Choice

Unemployment figures could decrease demand and may be useful for inventory planning decisions.

• Quantitative

• Qualitative

Multiple Choice

Nifty Sporting Goods has a customer suggestion box for new products that the store should offer for sale

• Qualitative

• Quantitative

Multiple Choice

Sales figures for last year can help a business plan current inventory levels

• Qualitative

• Quantitative