The Definitive Guide to Business Finance: What smart managers do with the numbers, Second Edition

So you need to forecast sales?

So, you need a sales forecast. How do I know this? Easy. Cooking up a forecast of anything in a business context nearly always boils down to forecasting sales volumes (i.e. quantity rather than value). Once you have this central number, everything else will be estimated, not forecast.

The secret

The secret of successful forecasting is to identify just one variable to forecast (usually sales) and estimate everything else based on that forecast.

For example, when the board of directors asks for a forecast of net income or net profit for next year, they are really asking you to forecast sales and then fit everything else into place around this key number. In a nutshell, once you have arrived at a figure for sales ...