2.2.1 sales forecasting

• sales forecasting


  estimates the volume or value of future sales using market research or past sales data
• the purpose of sales forecasting

  1. avoid cash problems

  manage their production, staff and financing needs more effectively and possibly avoid unforeseen cash flow problems
• the purpose of sales forecasting

  2. free up management time

  a well-constructed sales forecast can allow the business owners to spend more time developing their business
• the purpose of sales forecasting

  3. production capacity

  estimate if they need to increase or decrease production - production capacity to deal with unexpected demand
• the purpose of sales forecasting

  4. employ more workers

  forecast high sales - employ more staff to meet new demand
• the purpose of sales forecasting

  5. start promotional activity

  try and increase sales through promotion and marketing
• factors affecting sales forecasting

  1. customer trends

  a sales forecast may take into account customer trends
• factors affecting sales forecasting

  2. economic variables

  economic variables such as; interest rates, inflation, unemployment rate and GDP
• factors affecting sales forecasting

  3. actions of competitors

  the actions of competitors may affect sales forecasting
• difficulties in sales forecasting

  1. no guarantees

  no guarantees that sales will meet forecast levels
• difficulties in sales forecasting

  2. dynamic markets

  when markets change quickly and are hard to predict
• difficulties in sales forecasting

  3. short-term thinking

  a sales forecast is useful for a business which can produce and sell products or services in a one year period