A lot of people have their own business. It can be a small or big one. You can own just one small shop or a big corporation. But nevertheless you have to know how much money you will have in one month or some years, how much products you will produce or sell. That is why you must use sales forecasting. Some people say that sales forecasting is a science but a lot of scientists hold the opinion that it is art. Sales forecasting is subspecies of economic forecasts. And if the second is the science that consists of the tools and methods from different sciences like simulation forecasting, Forester's method, linear programming, economic dynamic correlation, regression and others, sales forecasting is the art of mathematical, economic, statistical and entrepreneur talent combination.
The reality is in business impossibility without sales forecasting. Even if you plan the sales level for the next month, think over the price and discounts, the quantity of the staff you are forecasting. In order to solve these problems you have to know the requirements of people, the market of your product with its propositions, quantity and quality of the products. If you want to do sales forecasting easily you can break the sales amount into the parts by product lines and then forecast every line for one to another month and then to unit them into one product line for the year. So it is something like the plan and the staff, all your resources and capital are submitted to it. It does not mean that everything will be as in your forecast but you have to try to act closely to your business plan.
At first, you gather the information about the past sales. You need it by some reasons. The first one is that in this way you can use time-series methods and your forecast will be more accuracy. The second one is the goal of choosing a more understandable sales model. By the use of different methods for forecasting you can compare different models, increase the forecast accuracy and change the model if your data varies.
There are some problems in sales forecasting compilation. Some of then are actions of competitors, actions by suppliers, distributors and government, environment influence and so on. That is why the main problem is the choice of the forecasting method. For example, experts forecasting is used when there are small changes in environment, market, company actions, competitors' actions, actions by suppliers, distributors, and government or large changes in sales and costs. Besides this method you can choose role-playing, analogies, extrapolation, intentions, econometric and another methods.
So, the main reasons of sales forecasting are employment levels required, promotional mix and investment in production capacity. If you know the accuracy of computations, the time horizon and availability of your data and life cycle of your product you can choose micro (when you detail unit sales forecasts) or macro (when you analyze the market of your product as whole one) type of sales forecasting. After that you will plan your market area, consumers and volumes of your sales. That is the reason why you can increase your revenue and develop your business by sales forecasting.