2.2.1 sales forecasting

Sales forecast

Estimates volume or value of future sales using market research or post sales data

Purpose- avoid cash flow problems

Helps business manage production, staff and financing needs more effectively

Helps business write the income part of cash flow forecast

Purpose-frees up management time

Allow owner to spend more time developing business rather than making daily developments in sales and marketing

Purpose-production capacity

Estimate if they need to increase or decrease production which helps them see if they have enough production capacity to deal with expected demand

Purpose-employ more workers

If high sales forecast-employ more employees to cope with new level of demand

Purpose-start promotional activity

Low sales forecast with a product in maturity stage may mean business will try to increase sales through promotion and marketing

Factors affecting forecast

Consumer trends

Economic variables I.e inflation, unemployment rate

Action of competitors

Difficulties

No guarantees

Dynamic market

Short term thinking