The method of predicting future revenue is sales forecasting. Accurate revenue forecasts enable businesses to make informed business decisions and predict success in the short and long term. Companies will base their predictions on revenue data from the past, comparisons around the market, and economic patterns.
Sales forecasting can be done using past data like macroeconomic trends, demographics, weather etc. which is available in public domain. One needs to collect these data and ask a data analyst to prepare a sales prediction model using these data and he can predict his revenue easily. On obtaining predicted revenue he can easily estimate return on investment & hence decide on sales target, asking manufacturing team’s quantity to produce.
Advantages of Sales forecasting
- Insights-One of the crucial roles played by forecasting is to provide a starting point for planning by obtaining the expected future value of sales.
- Cost decrease-By forecasting accurately, inventory planning could be done efficiently & hence optimize cost by production,dispatch & quantity of inventory to be hold planned.
- Estimate financial needs-Financial needs can be estimated by knowing the future forecasted business.Working capital & fixed capital could be arranged accordingly thereby maximizing ROI.
- Establish new business-New business can be established by forecasting business in advance,gauze the business potential & plan investment as per the forecasted figure.