How To Forecast Sales

Determining sales forecast is a very important tool in any company. Your sales forecast will be used for your budget, target revenues, target costs, etc. Essentially, when you have a sales forecast, you can already predict the financial condition of a company.

Sales forecast is affected by many factors. The factors vary depending on the type of product to be sold. There are macroeconomic factors which consider the economic situation. A weak economy can spell a bleak sales forecast for luxury cars because it is not a necessity, along with jewelries or a yacht. Food and beverage, for example, do not change much either with a strong or weak economy because they are both necessary for everyday living. Market conditions and government intervention can also increase or decrease sales forecast. The liberalization of the telecommunications industry, as enacted by the government, can spell an increase in the sale of cell phone units while a tax on mobile calls and texts can decrease demand for prepaid call and text cards. Meanwhile, the introduction of the Intel Atom processor spelled the robust demand for cheaper netbooks in the market today. On the micro side, change in management can spell a difference in the sales forecast. Your new company president might be shifting gears towards product B, so product A will most likely experience a slump in sales performance.

There are several techniques to determine supply forecast. Sometimes, simple statistical and mathematical tools can be used to determine demand for a certain period of time. You can use growth rates and compare it with the last growth rate with the same external condition. You can then use this growth rate to derive sales forecast. Another is the rolling three months sales or RTMS. The RTMS considers the last three months' sales and the sales expected in the next three months by using rolling averages. One can also plot the actual sales using a graph. Then draw a straight line from the first sales value to the end. Unless you expect spectacular sales performance for your company, your sales should behave conservatively over or above that straight line. This line is also called a trendline.

Your Microsoft Excel is your friend. There are a lot of built-in formulas in Microsoft Excel that you can use without having to spend money on complicated software programs. The FORECAST function calculates, or predicts, a future value by using existing values. There are also the TREND and GROWTH functions that can extrapolate future values that extend a straight line or exponential curve that best describes the existing data. There are also data analysis tool packs that can be used to further empower your Excel.

Ultimately, your choice of forecasting tool will depend on your preference. A forecast is only good if it can be feasible, otherwise your forecast will get revised. Forecasting should be done hand-in-hand with actual field situations and scenarios. Before you finalize your sales forecast, consult your sales executives first. They are the best people to validate your figures because they know what is happening in the field.


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