A business plan is a document that describes the cause of action that a business intends to take in order to achieve the intended business goals, strategies and objectives. As such, a business plan outlines what a business intends to do, and how to do it. Sales forecast is a prediction of future sales based on past sales performance as well as an analysis of market conditions that the business will expect in future. Sales forecasts are the backbone in any business, since a business growth is usually estimated by how much it will sell now and in the future. The sales forecasts provides a platform for estimation of the expenses that are going to be incurred, the profits that will be expected as well as the growth potential of the enterprise. In the business plan the sales are normally among the first items that the management of any organization pay a close attention to.
Statistics forecasts sales based on past sales trends that are available in the company databases. Statistics is important as it allows us to quantify things. “Gut reaction” on the other hand results due to forecasts based on the opinion of the sales person. A change in the market predictions as a result of personal opinion may lead to an intertwined feeling in the stomach of most investors, that is “gut reaction”. This reaction will trigger a response in the minds of the businessmen leading to readjustment of their business plans in order to cope with the said changes.
Investors however should be calm even in times of market uncertainties in order for them to remain in the investment for long-term benefits. When formulating the business plan it is important to create room and be prepared psychologically that the sales forecasts predicted may not be accurate given the market volatility. When predicting the sales, it is important to take a long-term view when one is investing on assets that have the potential for growth such as shares. Statistics uses the past to predict the future by using sales trends and market patterns and uses mathematical formulas to develop forecasts (Statistical Forecasting, 2006). It is challenging for a business to have reliable data on sales. However, in forecasting sales for uncertain events in the market, using statistics is preferable compared to the “gut reaction”. Basing forecasts on trends that are tangible in the market allows managers to avoid “gut feelings” sales forecast. This is because using statics allows the sales team to be accountable for the forecasts they produce. They will therefore formulate a cross-functional team from all the departments in establishing a more tangible and close link between supply and demand to avoid uncertainties that will be detrimental to the business.