Sales forecasting provides a statistical method for you to determine the probability of your sales. Whether you want to establish your bottom line, or you want to determine your average monthly sales, you can use sales forecasting. Key terms in this industry can help you determine which forecasting techniques to use. Some key terms to know include predictive modeling, consensus, collaboration, and modeling algorithms.
Predictive modeling takes historical data and analyzes it to find the results for future sales. Usually this statistical model works best to figure out specific equations for forecasting sales.
Sales forecasting shouldn't rely strictly on statistical methods; it should also use qualitative forecasting. This type of forecasting uses techniques like visionary forecasting, panel consensus and other methods like the Delphi technique. The goal for each of these techniques is to use new technology and information to add to historical data in order to get a better consensus for sales forecasting.
The Delphi technique
The Delphi technique aims to create a consensus among experts in the industry with the hope of gaining insight into complex problems or scenarios for which few models exist. Some critics hold that this method is unscientific, or coercive and therefore unethical.
Quantitative forecasting uses numbers as the data to predict future sales. These numbers are then manipulated through mathematical techniques to determine probability.
When it comes to sales forecasting, a customer profile can help a new business determine future profit. The customer profile identifies the client base for the business and takes into consideration such factors as demographics, age and income level.
The bottom line is often a synonym for a business's profit. In actuality, the bottom line can refer to profit and loss, and the term derives from the last line of a financial statement, which shows the calculations for profit and loss.