The demand forecast is to make an estimate of our futures sales (either in physical or monetary units) of one or several products (generally all), for a certain period of time (generally one month).
Carrying out the forecast of the demand will allow us to prepare our projection or sales budget (demand in physical units multiplied by the price of the product) and, from this, to be able to prepare the other projections or budgets.
For example, by forecasting or calculating how much our future sales will amount to, we can calculate how much will our production be (how many products will we need to produce), how much will our costs, how many staff will we need to hire, how much will our profitability increase, etc.
And, in this way, achieve better control, greater coordination, minimize risks, and all the other advantages that good planning entails.
Methods for forecasting demand
Let's see below some of the most used methods to find the demand forecast:
Analysis of historical records
It consists of analyzing our past sales and making a projection of them, for example, if we have noticed that our sales in recent months have increased by 10%, then, the logical thing would be that for this coming month they will also increase by 10%, but if we also notice that this next month is high season for the type of product we market, and that we have also decided to invest more in advertising, then we could predict that for this next month our sales will increase by 20%.
This method requires that the business already have a time of operationsTo find the forecast of demand for a new business or to launch a new product, let's continue looking at the other methods.
Potential demand method
It consists of first finding the potential demand (maximum possible demand that could be given in a market) of all the products similar to ours that exist in the market to which we are going, and then, based on said potential demand, determining the demand for our products, taking into account limiting aspects such as:
- The size of our investment,
- our working capital,
- our factory capacity (maximum production capacity),
- our supply capacity (availability of raw materials and labor),
- our marketing effort, etc .;
But also, taking into account other aspects such as the demand of our competition, our business experience, opinions of people with experience in the same type of business, etc.
For example, if we wanted to forecast demand for our business of restaurant, first we would find the potential demand that exists for all restaurants that make up our target market (for example, a district, an avenue, a shopping center), and then, based on that potential demand and other aspects such as the size of our business, our advertising investment, the information we have collected from competition, etc., we determine or forecast our demand.
For example, once we have found potential demand, we determine that we will work to capture 20% of said potential demand, that is, said 20% will be our demand forecast.
Market research method
It consists of forecasting our sales through an investigation or market study, we can, for example, make use of surveys, where some of the questions could be:
- "Are you interested in purchasing this product?"
- "Would you be willing to try this new product or service?"
- "How much would you be willing to pay for this product?"
- "How often do you consume or purchase similar products?"
- "How much do you spend on average going to similar businesses?"
- "How often do you go to similar businesses?"
Or we can also use other market techniques, for example, we can visit businesses similar to ours and calculate the average number of clients they have and the average consumption of each one, or we can do short interviews with clients of our main competitors or people who have been in the same type of business as ours before, etc.
As a final note, we must say that to find the demand forecast, there is no method or specific formula, but we must be creative, being able, for example, to make use of several methods, in the end it does not matter which method we find used, the important thing is to achieve the best possible approximation.