Sales forecasting contributes to financial planning.
A sales forecast is an estimate of the transactions that a company could complete in the future . This is a projection that is carried out based on trend analysis and historical sales data and taking into account various statistical models.
To understand the concept precisely, it is important to pay attention to the terms that make it up. A forecast is a prediction or prediction: an anticipation of the future based on evidence. Sales , meanwhile, are operations that involve the transfer of ownership of a good to the person who pays the corresponding price.
The sales forecast, in this way, consists of calculating how much income a company would obtain in a certain period thanks to its commercial activity . The result of this forecast allows the entity to prepare for certain scenarios.
Its characteristics
Sales forecasting is based on information. Its development requires collecting both internal and external data and then carrying out an exhaustive analysis of it. In this way, it is possible to predict the commercial performance of the firm.
The information must be segmented and contextualized to facilitate its study. The goal is to achieve the highest possible precision .
When the sales forecast is not positive, managers have the possibility of making decisions to modify the outlook. However, even if the sales forecast is favorable, it is always important to prepare for different possibilities since contingencies may arise that threaten the fulfillment of the forecasts.
Market studies and analysis of economic indicators are key in a sales forecast.
Types of sales forecast
It is possible to differentiate between different types of sales forecasts depending on the approach. A sales forecast based on market demand , for example, is geared toward opportunity analysis and competitor research.
Another type of sales forecast originates from the evaluation of time series . In this case, the identification of trends and the examination of sales history are used. Thus, the activity derived from seasonal factors (such as Christmas or Mother's Day) is considered, among other issues.
When the prediction is derived from the conversion cycles and rate, it is called a forecast derived from the sales funnel . Another possibility is to focus on accounts to detect which trading opportunities are active.
A common classification refers to the time horizon. In this context a distinction can be made between a short-term sales forecast and a long-term sales forecast .
A company can also segment its forecasts according to various criteria. A sales forecast by region is useful for companies with operations in different countries. A sales forecast by channel , on the other hand, is appropriate for studying the specific performance of physical stores, e-commerce, etc.
Even forecasts are differentiated based on anticipated results. A conservative sales forecast is based on the least favorable outlook; An optimistic sales forecast , on the other hand, considers the best outlook.
Artificial intelligence and big data help make sales forecasts.
Its importance
The sales forecast is a very useful tool in the corporate world. Among its advantages, it helps you stick to a budget because it anticipates what the expected income range will be.
The sales forecast is also key for commercial management in general: it contributes to the design of strategies and allows the area to be organized according to what is forecast. Production planning and inventory management are among the actions it favors.
Nor can we fail to mention the importance of sales forecasting in marketing . As planned, you can choose to allocate the investment to the most in-demand products to promote them or, instead, try to promote the rest.
Sales Forecast Examples
Take the case of a toy store . When analyzing its operations over the last five years, it is noted that 40% of annual sales are concentrated in December . Given this sales forecast, it is decided to hire additional personnel to meet the growth in demand in said month, as well as reinforce inventory in November so that the stock is sufficient.
Let's think about a restaurant . In this case, a study of the activity reveals that sales increase by 55% during weekends compared to the rest of the days . In turn, the establishment generates 70% of its monthly income in the first two weeks of each month . These data make it possible to make a sales forecast based on the demand forecast according to consumer behavior. Restaurant owners, in this context, design pricing strategies to encourage demand at times of lower consumption, establishing promotions.
Let's now look at the case of a clothing brand that plans to enter a new market. To design your business plan, sales objectives are set based on an analysis of the competition and the sector in general. Management relies on an optimistic forecast and invests to achieve product positioning in line with its goals.