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    Forecasting Sales and Developing Budgets

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    Bharathi Raju

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    Forecasting Sales and Developing Budgets

    Uploaded by

    Bharathi Raju
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    Copyright:

    © All Rights Reserved
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    Download as ppt, pdf, or txt
    12 views7 pages

    Forecasting Sales and Developing Budgets

    Uploaded by

    Bharathi Raju

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 7

    Chapter

    12 Forecasting Sales
    and Developing
    Budgets
    Salespeople underestimate
    how much they spend and
    overestimate how much they
    sell.
    Andy Cohen
    Sales & Marketing Management

    Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


    Sales Forecasting Methods
    Methods Advantages Disadvantages Best Used

    Executive Quick, easy, and simple Subjective For new products


    Opinion Lacks analytical rigor
    Sales force Relatively simply Salespeople are sometimes When reps are of a high caliber
    composite Usually fairly accurate overly optimistic When each rep has a small
    Involves those people who Salespeople may sandbag number of customers
    are responsible for the results (estimate low) to look better
    Time consuming
    Survey of Done by those who will buy Time consuming For new products
    buyers the product, so accuracy High cost When there are a small number
    intentions should be good. Customer may not cooperate of customers

    Trend Objective and inexpensive No consideration for major For established products
    projections: Use historical data product or market changes When market factors are
    -moving average
    Require some statistical predictable
    -exponential
    smoothing analysis For aggregate company
    -regression
    analysis
    forecasts

    Analysis of Objective Unforeseen changes in the When market factors are stable
    market Fairly accurate and simple market can lead to and predictable
    factors inaccuracy
    Test Very accurate Time consuming For new products which do not
    markets Cost require large investments

    Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


    Fig. 12-6 Projection of Sales Trend by Least Squares Method
    2010 forecast
    x 10-year base

    x 2010 forecast
    35
    • • 4-year base

    •
    30
    •
    •
    25 •
    20 •
    •
    15
    •
    10
    •
    5
    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
    Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
    Market Factor Forecast: Dryever Diapers
    Next Year Second Year
    Projected population, ages 0-18 months 4,850,000 4,800,000
    Percentage using diapers 100 100
    Number using diapers 4,850,000 4,800,000
    Average daily diapers per child 2.55 2.55
    Diapers daily, ages 0-18 months 12,367,500 12,240,000

    Projected population, ages 19-30 months 3,300,000 3,200,000


    Percentage using diapers 80 80
    Number using diapers 2,640,000 2,560,000
    Average daily diapers per child 2.19 2.19
    Diapers daily, ages 19-30 months 5,781,600 5,606,400

    Projected population, ages 31-42 months 3,500,000 3,300,000


    Percentage using diapers 40 40
    Number using diapers 1,400,000 1,320,000
    Average daily diapers per child 1.10 1.10
    Diapers daily, ages 31-42 months 1,540,000 1,452,000

    Total daily diapers, all ages 19,689,100 19,298,400


    Percentage disposable diapers 95 95
    Number disposables daily 18,704,645 18,298,400
    Dryever market share percentage 20 20
    Expected daily sales (units) 3,740,929 3,666,696
    Wholesale price per diaper 0.07 0.07
    Annual sales forecast in dollars
    Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
    95,580,736 93,684,083
    Guiding Principles for Forecasting

     Fitthe method to the product/market


     Use more than one method
     Minimize the number of market factors
     Recognize the situation limits
     Use the minimum/maximum technique
     Understand math and statistics

    Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


    Methods for Budgeting

     Percentage-of-Sales Method
     Manager multiplies the sales forecast by
    various percentages for each category of
    expense.
     Objective-and-Task Method
     Manager determines the task that must be
    accomplished in order to achieve specific
    objectives, and then estimates the costs of
    performing the tasks.

    Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


    Fig 12-8 Flow of Information from
    Sales Budget to Other Budgets

    Sales budget

    Sales department Administrative Production


    expense budgets expense budgets department budgets
    (advertising, selling costs,
    administration) Profit-and-
    loss budget
    Cash budget

    Revenues Revenues
    Expenses Expenses

    Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

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