Forecasting is more art than science. Don't fear—it isn't as hard as most people think. Think of your sales forecast as an educated guess. Forecasting takes good working knowledge of your business, which is much more important than advanced degrees or complex mathematics. Whether you have business training or not, don't think you aren't qualified to forecast. If you can run a business, then you can forecast its sales. Most people can guess their own business' sales better than any expert device, statistical analysis, or mathematical routine. Experience counts more than any other factor.
If you've been following along with this book, you've been through some Internet sites and other information sources to know your customers and your industry. You've probably been thinking about your sales forecast while you went through that information. The research for a good forecast is almost always harder than the final process of actually making the detailed educated guesses. You've probably already done the research.
When the research is already done, the mechanics of sales forecasting are relatively simple. Break your sales down into manageable parts, and then forecast the parts. Guess your sales by line of sales, month by month, then add up the sales lines and add up the months.
This first illustration shows you a simple sales forecast which estimates total value for each sales category.
Value-Based Sales Forecast
This example of a value-based sales forecast includes simple price and cost forecasts to calculate projected sales and direct cost of sales.
Copyright © Timothy J. Berry, 2006. All rights reserved.