A sales forecast is a prediction of what a business’sales will be during a specific future time period.They can be short-term, intermediate, or long-termin nature.
Business managers and owners use sales forecasts frequently whenmaking plans for their businesses. Sales forecasts help them todetermine:o How much to buyo What new items to offero How many workers are neededo What prices to chargeo Whether promotion is needed
Approaches to ForecastingTop-down approach: (AKA the breakdown approach)Sales forecast is prepared for the company as a whole.Then, broken down into forecasts for specific products,salespersons, territories, product lines, departments, etc.
Approaches to ForecastingBottom-up approach: (AKA the build-up approach) TSales forecast is prepared by starting with separate forecasts forspecific products, salespersons, territories, etc.Then, these individual forecasts are combined into a forecast forthe entire company.
Categories of Forecasting MethodsQuantitative ForecastingQualitative Forecasting
Quantitative ForecastingQuantitative methods of forecasting sales are based onthe results of gathering and analyzing all kinds ofnumerical market data.Numerical data may come from internal sources such as:o Sales recordso Past product/market researcho Customer surveys that the company has on hand
Qualitative ForecastingQualitative, or judgmental, forecasting methods arebased on expert opinion and personal experience.The company prepares its sales forecasts by askingknowledgeable people such as experts in the field,sales personnel, customers, and companyexecutives.