How Sales Forecasting Works

By: Dave Roos
Just like a ship's captain, it's up to sales forecasting professionals to keep businesses on course.
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Managing a business is a little like running a ship. As the ship's captain, you  need to keep your eyes on the horizon to plan your next move. If there are storm clouds gathering, you must secure the ship's cargo and warn the deck mates to take cover below. If there are rocky waters ahead, you have to ask your crew to stand watch to help you n­avigate safely to the other side. If the next leg of the journey is going to be long, you need to stock up on food and supplies before leaving port.

In business, there's less chance of losing an employee to scurvy, but it's equally important to plan ahead and keep your eyes on the horizon. And the best way to plan for the future is to carefully analyze trends from the past. This is especially true when predicting future sales of a product or service.


Sales forecasting uses past figures to predict short-term or long-term  performance. It's a tricky job, because so many different factors can affect future sales: economic downturns, employee turnover, changing trends and fashions, increased competition, manufacturer recalls and other factors. But there are several standard methods that can produce consistently accurate sales forecasts from year to year.

Without sales forecasts, it's very difficult for you to steer the company in the right direction. You wouldn't know that the spring is always the slowest season, so you'd invest too much in inventory that would just sit on the shelves. You wouldn't pay attention to industry analysts who predict a robust growth in holiday sales, and you'd lose potential customers to the competition, which doubled its holiday sales force and marketing campaigns.

Exactly how important is sales forecasting to the sound financial planning and management of a business? And what are some of the methods and technologies that ensure the most accurate and dependable forecasts? Read on to find out more.