BUSINESS - 2.2.1/2.2.2 - SALES FORECASTING AND SALES,COST , REVENUE

what is a sales forecast

a sales forecast is an estimation of the volume (units) or value of future sales

calcualted using market research + past sales data

what are some quantitative methods used to sales forecast

quantitative:

• time series analysis, (analyzing data collected over time to identify trends/patterns

• market research

whats the purposes of sales forecasts

• avoid cash flow problems

• estimate if changes to production capacity need to occur (renting new premises ect)

• identify is additional staff are needed to cope with demand

• asses if promotional activity needed ( low forecasts )

what are the 3 main factors affecting sales forecasting

• consumer trends

• economic variables

• competitors actions

how does consumer trends influence sales forecasting

• businesses need to take into account changing taste in fashion/taste

• can look to secondary research like the mintel report to identify trends

• if a business doesnt adapt to changes in consumer trends this could lead to a stark fall in demand

how do economic variables affect sales forecasting

variables such as interest rates, inflation , unemployment rate and changes in GDP

for example poundland did well during the 2008 recession

how does interest rates affect demand

high interest rates see a fall in consumer spending as the cost of borrowing is higher, and reward of saving is higher

peoples debts become more exoensive leading to a fall in disposable income - fall in luxury/normal goods , rise in demand for inferior goods

how does inflation affect demand

as inflation rises the costs of goods rises and people have less purchasing power

leads to a depreciation in currency - good for exporters bad for importers

how does the actions of competitors affect sales forecasting

• if a comeptitor releases a new superior product , this will lead to lower sales forecasts

a business may see this and choose to produce less of this product

what are the difficulties with sales forecasting

• no guarantee of accuracy

• markets dynamic / trends go out fast

• companies may not have past data

what is revenue

revenue is the money coming into the business via sales

revenue formula

rev = volume sold x selling price

ways to increase sales revenue

• increase volume of product sold ( marketing/promotional activity)

• set a higher selling price ( must add value or ppl will switch to competition , may differ if price elastic)

whats variable costs

costs that change when output changes

what are fixed costs

costs that do not directly vary with output

premises, wages ect

what are some problems with estimating costs

• some mats harder to account for , raw materials affected by wastage

• returns / refund costs