2.2.1 Sales Forecasting

Sales forecasts

Predict Future Revenues based on Past Sales Figures

Used to determine resource requirements eg amount of staff/stock needed, equipment upgrades/reduction

Factors affecting sales forecasts

1. Consumer Trends - seasonal variation, fashion etc

2. Economic Variables - inflation, unemployment, interest rates

3. Actions of Competitors - promotions, expansion plans, closure

Consumer trends

1. Seasonal variations

- Demand for certain goods is seasonal

2. Fashion

- Celebrities can have short term impact on demand

3. Long term trends

- Consumer attitudes + habits can change over time

eg increased demand for electric vehicles

Economic variables

1. Economic growth

- Increased consumer incomes can lead to higher than forecasted sales

2. Inflation - Increase of prices overtime, reducing spending power

- Businesses may forecast sales down during periods of rising inflation

3. Unemployment - Often during recessions causing reducing spending in the economy

- Forecasted sales for luxury goods may reduce

4. Increased Interest rates - Sales of Products usually bought with loans may be forecasted down eg houses

5. Exchange rates - Business selling products for tourists may forecast their sales up if the value of the £ reduces

Actions of competitors

Should consider Short-term actions of competitors eg sales promotions

Should also consider longer term strategies eg product changes, expansion plans

Constructing a Sales Forecast

- Requires skill, time and extensive data

Smaller businesses may lack the experience to construct + analyse a sales forecast + Difficult to avoid bias

- Can use Internal data eg previous sales figures + External data, can be challenging to select most relevant external data