Budgeting

2. Forecasting Sales

Sales forecasts are typically based on a combination of your sales history and how effective you expect your future sales to be.

2.1 Use your sales history as the basis for your forecasts, remembering that sales variations may reflect:

• How you market and price your product.
• Changes in your industry market, including what competitors are doing.
• Any other changes in your business, such as the launch of new products.

2.2 Assess what sales resources you have, and how you will use them. For example:

If this method of forecasting sales gives a very different picture from using historical performance, analyse why.

• What direct sales methods will you use?In each case, define how many potential customers you will contact and what success rate you expect.
• What advertising and other promotions will you carry out?How many enquiries do you expect as a result, and what percentage will turn into sales?
• How much of your sales effort will be directed at existing customers?What repeat business can you expect? Do you have any confirmed orders already?

2.3 You may prefer to build up your sales forecast from separate forecasts for different products or geographical areas.

• Separate forecasts will help you to pinpoint problem areas, individual product profitability, and so on.

2.4 Take into account seasonal patterns in your business and industry.

• When do you plan to carry out particular promotional activities? For example, trade exhibitions.
• Are there any special events or circumstances this year? For example, a particularly late Easter, or major sporting events.