Sales forecasting is simply the process of predicting future sales. Generating accurate sales forecasts enable business and marketing strategists to make better business decisions and leverage their position in their respective niche.
In order to obtain accurate sales forecasts, a business requires extensive data from previous years. This kind of information can be analyzed for trends and patterns which can be interpreted and tested for future results.
If a business does not have this information, they can use market research and other less accurate information to forecast the future of their sales performance.
Why is Sales Forecasting Important?
When a business has established their sales forecast, they gain competitive insight on how to manage their cash flow, marketing budget, and work processes.
Essentially, sales forecasting allows you to:
- Determining production capacity (i.e. availability of equipment, process of cash flow, costs of employment, etc.)
- Establishing a sales budget (i.e. for advertisements and other costs associated with customer acquisition)