The prognosis of sales

13 August 2009 - 17:20

The prognosis of sales is an estimation of the future sales (or in physical or monetary terms) of one or several products (generally all) for a period of certain time.

To realize the prognosis of sales allows us to elaborate the budget of sales and, from this one, to elaborate the other budgets, such as the one of production, the one of purchase of consumptions or merchandize, the one of personnel requirement, the one of cash flow, etc.

In other words, to make the prognosis of sales allows to know us how many products we are going to produce, how much we needed consumptions or merchandize, how much personal we are going to require, how much we are going to require of investment, etc., and, that way, to obtain one more a more efficient management of the business, allowing us of planning, of coordinating and of controlling activities and resources.

Also, the prognosis of sales allows us to know the utilities a project (when remaining to him the future debits to the future sales), and, that way, to know the viability the project; reason for which the prognosis of sales usually is one of the most important aspects of a plan of businesses.

The form most common to elaborate the prognosis of sales, consists of considering the historical sales and to analyze the tendency, for example, if the month sales ancestor were of US$1 000, those of the month they happened were of US$1 100, and those of this month they were of US$1 210, most probable it is than the sales of the next month also have also an increase of 10%, that is to say, that they are of US$1 331.

When using this method, also we can consider other factors like, for example, the season, for example, if the next month is a festive month where it increases the consumption generally, then we could foretell that the sales for the next month do not increase in a 10%, but in a 20%, that is to say, they are not of US$1 331, but of US$1 452.

The problem arises when we did not count on historical data, for example, when we are going to begin a new business, or to send a new product; in these cases, to find the prognosis of sales we must use other methods.

Methods to realize the prognosis of sales

We see next which are the main methods that we can use to realize the prognosis of sales:

Historical data

The first method is the one that we previously saw, consists of taking like reference the past sales and to analyze the tendency, for example, if in the past months we have had an increase of 5% in the sales, we could foretell that for the next month the sales also have an increase of 5%.

When using this method, we can consider other methods or factors, for example, if for the following month we are going to increase our investment in publicity, instead of to foretell an increase of 5%, could foretell an increase of 10%.

In order to use this method, we must count on a business in march; for new businesses or products, we continue seeing the other methods.

Tendencies of the market

This method consists of taking like reference to statistics or indices from the sector or the market, analyzing the tendencies and, on the basis of them, to project or to foretell our sales.

For example, we can take like reference the index from prices to the consumer, the rate of growth of the sector, the rate of population growth, the entrance per capita, etc.

For example, if the rate annual average of population growth of our objective market is of 4%, we could foretell that our sales every year also have a growth of 4%.

Potential sales of the sector or market

This method consists of finding the first potential sales of the sector or market (the principles sales that could be given), and then, on the basis of this information, to determine our prognosis of sales.

For example, if through external publications or studies of market, we have found that the potential sales of our market ascend to US$100 000, and considering our investment, our capacity of production, and the opinion of experts, we decided to catch a 10% of these potential sales, reason why our prognosis of sales for the next month or year would be of US$10 000.

Sales of the competition

This method consists of calculating the sales of the competition, and taking these like reference to foretell ours.

In order to calculate the sales of the competition, we can visit its premises, interview its clients, interrogate people who work or have worked in this one, etc.

For example, through the technique of observation and of the interview we calculated that businesses similar to ours receive in average the visit of 50 clients to the day, which they spend in average an amount of US$40, reason why have in average daily sales of US$200, which corresponds to an average of monthly sales of US$6 000; amount that we will take like reference to determine our prognosis of sales.

Surveys

This method consists of obtaining data through surveys where the questions would be related to the intention of purchase, the frequency of purchase and the cost average.

For example, if our objective market is conformed percent 000 people, and through the surveys we concluded that 10% would be arranged to prove our product, that the average of consumption is of 3 products to the month, and the price average to pay by similar products is of US$4, we could foretell that our monthly sales would be of US$120 000.

Tests of market

This method consists of realizing a pilot test where the new product in certain zones is offered with the purpose of to evaluate the answer of the consumer and, on the basis of it, to foretell the sales.

For example, we placed a small position of sale where we offer the new product, we measured the purchases realized in the day and, on the basis of it, we foretold the sales that we could obtain when counting on several points of sale.

Personal judgments

This method consists of foretelling our sales basing us on our experience, common sense and good judgment.

For example, to foretell the sales of our new business, we took like reference the sales from other businesses where there are been previously.

In order to use this method, also we can ask for the opinion of other people, for example, the one of our own workers (mainly the salesmen), the one of experts in the subject, or the one of people who have experience in the business, for example, people who have had the same type of business, or which they work or they have worked in the competition.

How to make the prognosis of sales

In order to make the prognosis of the sales, they are not needed elaborated technical statistics nor complex mathematical formulas, to make the prognosis of sales, is more than everything, a question of experience, creativity, common sense and reasonable conjectures.

In order to find it, the recommendable thing it is to combine the described methods previously, but, simultaneously, to consider other factors such as:

• Capacity of the business: limiting aspects of the business, such as the investment, the capacity of production, the capacity of supplying, the size of the business, the effort of marketing, etc. For example, perhaps exist an unsatisfied demand for our products, but our investment and capacity only allow us to offer a certain amount of products, then only this amount would conform our prognosis of sales. Or, for example, if for the next month we decided to increase our investment in publicity, we must suppose that our sales also will increase.

• Seasons: times or stations that appear during the year. We must consider that are products that throughout demand the year (they have a continuous demand), are others are only demanded at certain times of the year (for example, the clothes of bath in the summer), and are others have an irregular demand, that is to say, that its demand or usually lowers at certain times (for example, the demand of the toys which it increases in Christmas).
• Aspirations of sales: and, finally, we must consider our aspirations of sales, that is to say, to consider how much it is what we wanted to sell, or which we wanted that they are our objectives of sales. But always considering other factors, mainly, the limiting factors of the business.

As it aims end we must indicate that it does not concern the used method or methods to realize the prognosis of sales, will always be complicated to obtain an exact prognosis, reason why our objective does not have to be to count on an exact number, but to aspire to the possible approximate major.

Labels: Concepts, Sales

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