Professional Documents
Culture Documents
Sales Forecast
It is estimate of a companys sale for a specified
future period.
Sales forecasting provides the starting point for
systems. The financial budget is dependant upon the sales forecast for the projected revenue figures.
to project staffing needs, financial executives use it in establishing and controlling operating and capital budgets, and production manager uses it to schedule purchasing and production to control inventories.
It is thus a very vital planning task for any
organization.
industry sales of a good or service in a specified market segment for a given time period. e.g. the market potential for the sales of antifreeze in New England might be 20 millions gallons annually. (Based on buyers ability to buy and willingness to buy)
Sales Potential refers to an individual firms market share of
the market potential, where market share is defined as the percentage of market controlled by a particular company or product. It is the maximum sales a firm can hope to obtain.
expects to obtain, based on the market conditions, company resources, and the firms marketing plan. The sales forecast is less then the sales potential since it is based on realistic set of circumstances.
Sales Quota is a sales goal assigned to a sales person,
region or a team. They are usually derived from the sales forecasts. Sales goals and objectives sought by management.
Sales Budgets a management plan for the expenditures to
Introduction stage There is no historical sales record and new products have a high failure rate, so it very important to prepare realistic estimate of potential sales, based on thorough marketing research.
Sophisticated mathematical models are used here to project market share and estimate sales.
Maturity and Decline stage traditional forecasting techniques
conditions
2. Preparing a forecast of industry sales
sales
8
It is measuring the GDP, which is the value of goods and services produced within a country during a given year. Some of the others factors are; stock market fluctuation, personal income, level of employment, consumer price index etc. These data are usually available from government or trade associations.
11
Qualitative Methods
(1) Jury of executive opinion: Panel charged with developing a sales forecast. The group has executives from different departments like marketing, sales, marketing research, finance, production, operations etc. Each member is asked to provide an estimate of future sales with written justification. The opinions are then pooled and analyzed at group meetings. The advantage is its simplicity, but might take too much time of the executives involved.
12
business activities, technology, new product development, and market conditions. These experts are kept apart from each other so that their opinions are established independently. They prepare individual forecasts, which are then compiled and then given back to them for a second round of projections. This process continues until a consensus forecast of the future emerges. The Delphi technique has the advantage of eliminating the group pressures of a typical committee meeting.
13
estimates of expected sales for their respective territories. Field sales people should be motivated to accept sales quotas when they know that the information they supplied played a major role in forecasting. A major disadvantage is that sales people might be a poor judge of future sales level or market conditions. They can have bias opinions as well.
14
Forecast survey of a limited and well-defined group of buyers. This is when the potential customers are well defined and limited in number, such as industrial products.
Disadvantage is that a customer might not always do what they say and they plan to do. Secondly customer-buying behavior might alter in response to change in the operational environment.
15
Quantitative Methods
Continuity Extrapolation technique that attempts to
increment of sales change into the future. A time data series is determined by four basic elements of sales variations (a) trends or long run changes (b) cyclical changes (c) seasonal variations (d) unexpected factors. Most form of times series analysis use a moving average to analyze and project sales.
16
series analysis. Actual sales of recent periods are weighted more heavily then the average sales of earlier periods.
Regression and correlation analysis aim of
regression analysis is to identify factors that influence, or are closely associated with changes in sales. A simple regression is a forecasting technique using only one independent variable. While multiple regressions uses two or more independent variables.
17
Sales Budgeting
Estimating future levels of revenue, selling expenses, and profit contributions of the sales function.
18
Types of Budget
Financial statement that outlines firms intended actions and the resulting cash flow consequences. Most sales budgets covers a period of one year, but they are often broken down into quarterly or even monthly targets.
Sales budget projection of revenue computed from
department will spend to obtain the revenues projected in the sales budget.
Profit budget merged sales budget and the selling
19
spend on selling after accounting for the cost of good sold and the desired profit level.
Percentage of sales method the funding level is found
by multiplying the sales revenue by a given percentage. Budgeting is based on anticipated rather then historical revenue.
Competitive parity method sales budgeting method
based on the competitive practices in an industry. They refer to either a specific competitor or the industry average.
20
the objective of the firm, tasks necessary to achieve those objectives, and the expenses related to those tasks. It is known as zero-based budgeting.
Bidding system in this the sales function competes with
begun to use this financial management concept to chose between alternative courses of action. ROI is determined by dividing net income by total assets employed to earn the income.
21
6. Specification of Resource Requirement the resources that will be required to implement the specified activities and achieve the objectives. 7. Completion of Projections here all the input and requests from various units of the sales function are assembled and tied into a comprehensive package.
8. Presentations and Review present and defend its sales budget proposal to the management.
9. Modification and revision sales managers have to engage in a series of compromise sessions. Here the sales targets and budgets might be adjusted by the higher management, reflecting both to the needs of the corporation and the true potential of the marketplace. 10. Budget approval final levels are eventually approved and authorized for both the sales and the selling expense budgets. Here onwards budgets are reviewed periodically looking at the on going market conditions and other external forces.
23