There are many ways that businesses can estimate sales revenue in order to forecast future sales. Those who want accurate forecasting results should use multiple methods of sales forecasting.
How to forecast sales
Comparison between businesses
One of the more popular forecasting methods is to compare the average sales volume per square foot of the business to similar businesses that are of a similar size and in the same area. This is not the final figure that forecasters will deal with but it will give them an accurate figure to look at.
Forecasting sales by location
Another method of market forecasting is to determine how many target customers live within a mile of the store. Further analysis should be done on how often these people will need to purchase the goods being sold by the vendor. Vendors should also take into account how much of the market they will lose to competitors.
Short distances versus long distances
The same method should repeated for customers that live within five miles of the store. Stores should take the time to figure out which distances make sense for their store. For example, a shop in the middle of the countryside will have a wider area to analyze than one that is in the middle of the city.
Forecasting by specific products and services
Stores that sell more than one product should estimate how many units of one product or service will be sold within a specific time frame.
Setting a target
They should also set a goal to sell more than the expected level of sales. For example a clothing store that sells 5 shirts a day may want to aim for selling
6 shirts a day. This is done so that the forecasting report scales sales proportionately. For example a new business will be slow in the first month of opening the store. The following month will have improved sales as more people will be aware that the business exists.
Tips for accurate sales forecasting results
Forecasters should make sure that they create more than one report. Ideally there should be an optimistic, pessimistic and realistic forecasting report. Trend forecasting It is also important to do a monthly forecast as well as an annual report as there can be variations in sales month by month.