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Short-Term, Long-Term & Immediate Sales Forecasting

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  • 0:03 Value of Sales Forecasting
  • 1:07 Immediate Sales Forecasting
  • 1:27 Short-term Sales Forecasting
  • 2:10 Long-term Sales Forecasting
  • 3:00 Lesson Summary
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Lesson Transcript
Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

Creating sales forecasts is a critical activity in an organization as it helps estimate the amount of income that will be coming into the business in the short and long term, as well as immediately.

Value of Sales Forecasting

A sales forecast provides an estimate of how much a company will sell of individual products or product lines and the amount of total sales that are expected. A sales forecast helps a company make plans of how much revenue it will bring in, giving an idea of how much gross income a company will earn and what the net income may be after estimated expenses are deducted.

Sales forecasting is vital to a company's ability to react to changes in the market. If it looks like the economy is slowing down or consumers are spending less, a sales forecast can show the potential effect these changes will have on sales. Likewise, if higher sales are expected, the sales forecast can identify that the income will be higher.

Let's imagine you are a sales manager for the local tire store. Your job is to forecast how sales will be for the next six months, the next year, and the next five years. You analyze past sales and the current sales numbers to create estimates for the next sales periods. Based on the information you have available, you're forecasting sales to increase because the population is growing in the area, and sales have increased in the past year.

Immediate Sales Forecasting

As in the example we just covered, you were asked to create a sales forecast for the next six months. This period of time is a perfect example of immediate sales forecasting. Having a forecast for this small range of time helps a company determine if immediate steps must be taken to support sales and increase income if the current trend is showing slower sales.

Short-Term Sales Forecasting

Depending on the company and industry, the range of short-term sales forecasting can vary. It may range from several months to several years. A more established industry may have a longer range of time that is considered short-term for them.

Returning to the tire example, as a local sales manager for a small tire shop, you may consider short-term sales analysis to be 12-36 months long. However, the tire manufacturer who has been in business for 50 years may consider five to ten years as a short-term sales forecasting period. In creating a short-term forecast for your tire store, you are looking at the possible sales that may happen in the next few years. You want to make effective decisions that will allow your business to grow in the short-term.

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