How to Forecast Sales for your Business

It is important to be able to forecast sales accurately when your business will benefit and if startup funding will be necessary. However, it is difficult to project sales without historical data. You need to find out here what you need to do. 

The future is unknown and perhaps difficult to predict, but we have to plan it around. In business, the same logic applies, we need a sale forecast to meet the inventory needs and growth strategies. In order to calculate revenue, we need to project prices and project costs for profit estimation. We should not expect future performance to be perfect, but a right approach will turn sales forecasts into a strategic approach from a preliminary inspection process. It helps you manage employees and inventory, allocate resources, adapt courses and support strategic rations. 

Here we discuss how you can create a business sales forecast to serve as the backbone of your business’s growth.

Develop a unit sales projection 

Where you can start with unit sales projections per month. Not all companies sell by units, but most, and by breaking things into their component parts, it is easily forecast. Obviously, product-oriented companies sell in units, but a lot of service companies also. Accountants and lawyers are, for example, selling hours and taxis sell rides, and restaurants selling meals. 

Use past data if you have it 

Whenever you have past sales data, your best forecasting aid is the most recent past. There are some statistical analysis techniques that take past data and project it forward into the future. You can get just about the same results by projecting your two most recent years of sales by month on a line chart and then visually tracking it forward along the same line. Statistical tools are a nice addition, but they're rarely as valuable in a business plan as human common sense, particularly if it's guided by analysis.

Use factors for a new product

Having a new product is no excuse for not having a sales forecast. Of course, you don't know what's going to happen, but that's no excuse for not drafting a sales projection. Nobody who plans a new product knows the future--you simply make educated guesses. So break it down by finding important decision factors or components of sales. If you have a completely new product with no history, find an existing product to use as a guide. For example, if you have the next great computer game, base your forecast on sales of a similar computer game. If you have a new auto accessory, look at sales of other auto accessories. Analysts projected sales of fax machines before they were released to the market by looking at typewriters and copiers.

Break the purchase down into factors 

For example, you can forecast sales in a restaurant by looking at a reasonable number of tables occupied at different hours of the day and then multiplying the per cent of tables occupied by the average estimated revenue per table. Some people project sales in certain kinds of retail businesses by investigating the average sales per square foot in similar businesses.

Be sure to project prices

The next step is to price. You've projected unit sales monthly for 12 months and then annually, so you must also project your prices. Think of this as a simple spreadsheet that adds the units of different sales items in one section, then sets the estimated prices in a second section. A third section then multiplies units times price to calculate sales. The math is simple--the hard part is making that estimated guess of unit sales.

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