Navigation bar
  Home Print document Start Previous page
 70 of 71 
Next page End 65 66 67 68 69 70 71  

© Copyright 2002-2003. All rights reserved.
Page 70
How To Investigate Any Business Opportunity
Adjustments have to be made, of course, for any known or predicted conditions that will change this rate
of increase - conditions such as unusual weather, short-lived labor disputes, changes in the dates of
events such as Easter, and so on.
Distribution of sales by months. A longer method of forecasting is based on the distribution of sales by
months. This method works best if the monthly variations over a period of years have been small.
Suppose, for instance, that a short-term forecast is being made in June. For the past several years, sales
in July have been between 11 and 13 percent of annual sales, with an average of 12.5 percent. During
the same period, May sales have averaged 10 percent of annual sales. Sales during the May just past
were $16,000. Then $ 6,000 : 0.10 = $160,000, the estimated annual sales. Projected sales for July will
be 12.5 percent of $160,000, or $20,000. Sales for other months can be forecast in the same way.
Cumulative percents. Another method of short-term forecasting is the cumulative-percent method. The
percent of total sales is figured for each week during the past year and added to the percent for preced-
ing weeks, as shown in this example :
Weeks        Weekly percent           Cumulative percent
1                       0.9                               0.9
2                       1.1                               2.0
3                       1.4                               3.4
4                       1.7                               5.1
5                       1.9                               7.0
6                       2.4                               9.4
7                       2.6                             12.0
8                       2.9                             14.9
9                       3.1                             18.0
If sales during the first 4 weeks amount to $8,000, the annual total will be estimated at $8,000 : 0.051, or
$156,862. To forecast sales for the next 4 weeks, add the percentages for those weeks and multiply the
annual estimate by the result ($156,862 X 0.098 = $15,372. This method works best for goods or ser-
vices that are not subject to wide variations in sales volume and whose prices do not fluctuate greatly.
Number of sales transactions. Where prices tend to vary, the number of sales transactions may show
a steadier trend than dollar sales do. 
An increase in dollar sales without an increase in the number of transactions means that the average dol-
lar value per transaction has gone up. This increase in the amount of the average sale may mean (1) that
customers are buying higher-quality goods, (2) that they are buying in larger quantities, or (3) that prices
have increased.
If the level of transactions is steadier than the dollar sales, the forecast tends to be more conservative. A
study of the transactions may bring to light factors not revealed by total dollar sales.
Previous page Top Next page