Sales forecasting

Sales forecasting is defined as a projection into the future of expected demand, given as stated set of environmental conditions. Forecasting is the term used to describe procedures for foretelling the future. An alternative term is ‘prediction’ and most writers use the terms interchangeably.

This is distinguished from the sale plan, which here defined as a set of specified managerial action to be undertaken to meet or exceed the sales forecast.

Since a sales forecast revolves around a specific target market, that market should be defined as precisely as possible. The market description forms the forecasting boundary.

Because the goal of sales forecasting is to make the projections within a defined environment, a key measure of performance is accuracy off the forecast and a key method to explain variances in accuracy is how the environment varied from the one defined.

Sales forecasting must take into account the total market environment; the national and industry market, and the firm’s own performance in its traditional markets.

One sales forecast may cover a period of time that is a year or less, while another may extend over several years. Both short-term and long-term forecasts are needed for a well constructed business plan.
Sales forecasting