4.3 - Sales Forcasting (HL - Unit 2) Flashcards
Sales Forecasting
Predicting the sales volume for a business/product in the future
Benefits of Sale Forcasting
Help divide production numbers
- Less likely to have unsold stock/hold less stock
HR Planning
- How many employees do we need?
Can help with loan applications
- Predictions may help persuade banks
Cash flow management
- Ensure enough cashflow is on hand
Limitations of Sales Forcasting
Just a prediction
- Things may change in the future
External factors may change everything
- E.g. recession, Covid-19
Some industries are changing very quickly
- AI company
New businesses don’t have past sales numbers
Alternative Ways of Sales Forecasting
Based on experience or hunch
- Use the experience of the industry to predict the future
- Intuitive decision making
Look at similar business
- Look at the competition to see sales growth trends
Market Research
- Hire a market research company to do it
- Look a publically available market research
Seasonal Variations
Regular variations at certain times of the year
E.g. shops see higher sales in July/Aug
So if extrapolation to Jul in Year 3
- Take account of the higher sales in the summer
Cyclical Variations
Variations according to the economic cycle