© Copyright 2002-2003. All rights reserved.
Page 71
How To Investigate Any Business Opportunity
Intermediate-Term Sales Forecasting
Because of the combination of variables at work in the market, the techniques used in the short-term
forecast are not reliable when applied to the longer periods covered by intermediate-term forecasting. In
the longer forecast, two methods of measurement are generally used: the long-term trend method and
the correlation method. Correlation analysis requires data usually beyond the reach of the small busi-
nessman, but the long-term trend as determined by the least squares method may be useful. This
method will not be taken up here, but an explanation of its use can be found in any introductory book on
statistical methods.
Effect of Changing Market Factors
It must be reemphasized that a trend is determined from past data and from the total market as reflected
in company sales. Insofar as these conditions remain in about the same state of balance, a projection of
the trend into the future has some value; but the more dynamic these market factors are, the less reliable
trend lines become.
The investigator must give careful thought to how changing market factors will affect his forecast. Al-
though he cannot have precise knowledge of these factors, he must decide how influential they are likely
to be and adjust his forecast accordingly.
Conclusions on Forecasting
The reliability of a forecast is always uncertain. Past performance is no guarantee of the future. The basic
value in making a forecast is that it forces the buyer or seller to look at the future objectively. A forecast
does not eliminate the need for value judgments, but it does require the forecaster to identify elements
influencing the future. It may act as a damper on the buyers unbounded faith in his own managerial abil-
ity.