How to Forecast Sales

by Contributor ; Updated September 26, 2017

How to Forecast Sales. Sales are the most important aspect of any business. Forecasting sales is both a science and an art. The ability to accurately forecast sales will substantially increase the profitability of your business, as there will be minimal waste, obsolete inventory or costs related to over-staffing.

Review the last six months of sales figures on a daily, weekly, monthly and quarterly basis. How do they vary day to day or week to week. Is there a pattern to the activity?

Inspect the competition. Are their locations busy in comparison to yours, slower or about the same? Read industry focused magazines, newsletters. Attend trade shows and conferences. These activities will give you a sense of what is happening in the industry and the level of activity.

Calculate the percentage increase or decrease of sales from month to month. This is a two step calculation: Take current month sales, subtract last month sales. Divide this value by the last month sales. This value is the percentage increase or decrease.

Calculate the percentage increase or decrease value for the last 6 months. Compare the values and determine if there was a specific activity that related directly to the changes. An example would be a highly advertised sale, marketing or advertising campaign.

Remove the months where the changes can be related to a specific activity and calculate the average change. The average is found by adding up all the values and dividing by the number of values. This is your base sales percentage change.

Take the dollar value of sales for last month and multiply by the average percentage sales change. This is a conservative sales forecast.

Tips

  • Any computerized accounting software package will be able to provide standard reports that forecast sales for you with both conservative and aggressive forecasts.

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