What Could Cause your Forecast to be Inaccurate?
As we just mentioned, there are a multitude of factors that can make your sales forecast ineffective, let’s take a look at some of these factors.
Economic Factors: A rise in interest rates, economic slowdown and increased unemployment are some of the factors that can adversely affect sales. As the purchasing power of the end customer rises or falls, sales will experience something similar.
Environmental Factors: Some product lines experience changes in sales patterns based on some related environmental factor. For instance, if the period for which the forecast is being made experiences relatively less rainfall, the sales for rain related products, like umbrellas, rain shoes and rain coats, may remain below the past sales records.
Technological Innovations: Every day there is a new discovery, and if an alternative product with new appeal compared to your product has arrived in the market, it’s quite likely that some of your customers will shift over to the new innovation.
Competition: When new competitors jump into the market, your business will lose out on some of its market share. This is another factor that the method of sales forecasting using cyclical analysis doesn’t take into consideration.
Despite all its drawbacks, this method still remains one of the most used and most trusted methods for generating sales forecasts.