Chapter 9 &10
It is estimate of a company’s sale for a specified
Sales forecasting provides the starting point for
assumptions used in various planning activities.
It is used for the short-term financial control
systems. The financial budget is dependant upon
the sales forecast for the projected revenue figures.
Human resource executives use sales forecasts
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
It is thus a very vital planning task for any
Sales Forecasting Concepts
There are 5 levels of concern in sales forecasting:
(a) Market Potential
(b) Sales Potential
(c) Actual Sales Forecasts
(d) Sales Quotas
(e) Sales Budgets
Market Potential – it is the highest possible expected
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.
Sales Forecasts – is the sales estimate the company actually
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
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
accomplish sales goals.