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Sales Forecasting

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					SALES       2010
FORECASTING
Is it a Science or an
Art?
T ABLE OF C ONTENTS
Sales Forecasting is a
 Complicated Area of
 Management …………………… Slide 3 – 7
Sales Forecasting is Completing
 More than One Forecast ……… Slide 8 - 15
Sales Forecasting is Estimating
 the Market Demand                Slide 16 – 18
 ……………
                                  Slide 19 - 20
Sales Forecasting Summary
 …….
S ALES F ORECASTING     IS   …

A Complicated Area of
Management
W HY DO SALES FORECASTS ?
Businesses must adopt the
practice of looking well ahead
in order to decide and plan for:
• Launching their new products
• Their investments
• When and if to close
• When and if to withdraw
 products
W HY DO SALES FORECASTS ?
Forecasting sales is crucial
because it drives most
businesses.
The major decisions that are
come out of accurate sales
forecasts include:
• Whether or not to invest in
  production capacity
• Necessary staffing levels
• Promotional campaigns
M ACRO & M ICRO FORECASTING
The decision about the kind
of forecasting you should use
is driven by several factors:

1. The degree of accuracy
   that it calls for.
2. The availability of data
   and information.
M ACRO & M ICRO FORECASTING
3. The length or span of time
  that the sales forecast is to
  cover.
4. Where the product is in its
  life cycle.
S ALES F ORECASTING   IS   …
Completing More Than One
Forecast
C OMPLETING     MORE THAN ONE
FORECAST

• Pessimistic       • Examine and note the
                     extreme variations
• Optimistic         based on:
• Realistic              the type of business
                         the month
                         the time of year
T HE   FIRST METHOD OF SALES
FORECASTING

• For your kind of business, what is the average
 sales volume per square foot for similar stores in
 similar locations and similar size?
• This is not the final answer for a good sales
 forecast because a new business won't reach that
 target for probably the first year.
• This approach is far more scientific than a
 general 2 percent figure based on household
 incomes.
T HE   SECOND METHOD OF SALES
FORECASTING

• For your specific location, how many households
 that require your goods live within a one mile
 proximity?
• How much will they spend on these items every
 year?
• What percentage of their spending will you
 receive in comparison to your competitors?
T HE    THIRD METHOD OF SALES
FORECASTING

• If you were to offer three kinds of goods, and two
 kinds of extra cost services, estimate the sales
 revenues for each of the five products/service
 lines.
• Estimate where you think you will be in six
 months, for example every day I expect to sell:
     8 of item “A”
     6 of item “B”
     12 of item “C”

• Calculate the gross sales per day.
• Multiply by 30 for the month.
• Enter your expenses by month




                                   I NCLUDE
                                                                   Don’t forget
                                                                   about the
• Include your big purchases                                       inventory or
                                                                   materials that
                                                                   you purchased
• Include other expenses for:                                      in August, for




                                   ALL EXPENSES IN YOUR FORECAST
                                                                   the Christmas
                                                                   season.
     Vehicles
                                                                   You won’t
     Capital equipment                                            receive all of
                                                                   those receipts
                                                                   until 45 days
• Make sure to show depreciation                                   after Christmas.
 expense
• Allow for bad debts
• Allow for bad debts




                                        I NCLUDE
                                                                        Include an
                                                                        allowance for
• Calculate sales by:                                                   bad debts.

                                                                        Calculate the
     Credit card                                                       amount of cash,




                                        ALL EXPENSES IN YOUR FORECAST
                                                                        credit card, how
     Cash                                                              much you are
                                                                        extending in
                                                                        credit.
     Credit extension
                                                                        Deduct a
                                                                        minimum of 4%
• For payroll expenses                                                  for credit card
                                                                        expense for that
     Include quarterly estimated tax                                   portion sold by
                                                                        credit card.
      withholding payments
H OW   WILL YOU GROW YOUR
BUSINESS ?

• Selling more to       • Selling new products
  existing customers?    to existing customers?
• Selling existing      • Selling new products
  products to new        to attract new
  customers?             customers?
S ALES F ORECASTING   IS   …
Estimating the Market
Demand
W HAT IS M ARKET D EMAND ?
• Market Demand for a product is the total volume
 that would be:
       bought by a defined customer group,

       in a defined geographical area,

       in a defined time period,

       in a given marketing environment.

• The term has also been referred to as the Market
 Demand Curve.
W HAT IS M ARKET D EMAND ?
               An agency’s part of the market
               demand is based on how its
               products, services, prices,
               brands etc. are identified by the
               competitors.
               All other things being equal,
               the company's market share is
               based on the size and
               effectiveness of its marketing
               campaign in relation to its
               competitors’ campaigns.
S ALES F ORECASTING …

       Summary
                      When presenting




S ALES F ORECASTING
                      sales forecasts, by
                      now you can see
                      that instead of
                      estimating one big
                      sales figure for the
                      year, developing a
                      more realistic
                      monthly schedule
                      of income and
                      expenses gives you
                      much more
                      information to use
                      as a basis for your
                      decisions.




SUMMARY
                      That is what
                      maintaining your
                      books is supposed
                      to do.

                      It is supposed to
                      give you the
                      information you
                      need so that you
                      are better able to
                      make informed
                      decisions.
SALES
FORECASTING
Is it a Science or an
Art?
				
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