2.2.1 Sales Forecasting

Question 1

What is consumer income?

Answer 1

The amount of income remaining after taxes and expenses have been deducted from wages.

Question 2

What is a sales forecast?

Answer 2

A sales forecast estimates the volume or value of future sales using market research or past sales data.

Question 3

What is the purpose of a sales forecast?

Answer 3

1. ) Avoid cash flow problems
2. ) Frees up management time
3. ) Production capacity
4. ) Employ more workers
5. ) Start promotional activity

Question 4

What are factors affecting sales forecasts?

Answer 4

• Customer trends
• Economic variables
• Actions of competitors

Question 5

What are the difficulties of sales forecasting?

Answer 5

1. ) No guarantees
2. ) Dynamic markets
3. ) Short term thinking

Question 6

1.) Avoid cash flow problems?

Answer 6

-Accurately forecasting the sales + building a sales plan can help the business to manage their production, staff + financing needs more effectively and possibly avoid unforeseen cash flow problems.
-A sales forecast will help a business to write the income part of the cash flow forecast.

Question 7

2.) Frees up management time

Answer 7

-A well constructed sales forecast can allow the business owners to spend more time developing their business rather than responding day-to-day developments in sales + mkting.
-Managers will have more time to focus on the rest of the business.

Question 8

3.) Production capacity

Answer 8

-The business can use a sales forecast to estimate if they need to increase or decrease production + this will also help them to see if they have enough production capacity to deal with exp demanded.
-The business may need to buy or rent new premises if there is a huge increase in sales forecast.

Question 9

4.) Employ more workers

Answer 9

-If the business has high sales forecasts for a new product or service it may need to take on new employees to cope with new levels of demand.
-Failure to meet required staffing levels could result in poor reviews.

Question 10

5.) Start promotional activity?

Answer 10

-If sales are forecast to be very low and the product or service is not in the decline phase of the product lifecycle, then the business may decide to try and increase sales though promotion and marketing.
-Sales forecasts can also direct a business to a specific season or month when promotion activity would be most likely to net the most sales revenue.

Question 11

1.) Consumer trends

Answer 11

-A sales forecast may take into account consumer trends.
-Documents (reports) produced can help a business to identify an upcoming trend.
-Fashion shows + trade fairs can also be useful.

Question 12

2.) Economic variables

Answer 12

-Interest rates, inflation, unemployment rate + GDP can all affect how a business plan’s it’s sales forecast.
-For example, some sales contracts may not be renewed due to inflation + the rising cost of the products from the business, so it may need to lower prices to maintain the correct level of sales predicted.

Question 13

3.) Actions of competitors

Answer 13

-If a business has products that are facing declining sales, perhaps due to a competitor’s superior product, they may decide to produce less of those products.

Question 14

1.) No guarantees

Answer 14

-Just because a sales forecast has been written, there is no guarantee that sales will meet these levels (due to uncertainties/external factors).

Question 15

2.) Dynamic markets

Answer 15

-In April 2017 the fidget spinner was the must-have toy, by May 2017 most schools had banned them + sales were in decline.

Question 16

3.) Short term thinking

Answer 16

-For some businesses, e.g. ship building company or a hotel, a one year forecast will not be useful or appropriate for multi-billion dollar contracts, over a longer period of time.