How is a sales forecast typically developed?

A sales forecast is typically developed by analyzing historical data because this approach provides a solid foundation for making informed predictions about future sales. Historical sales data reveals trends, customer preferences, seasonal fluctuations, and other patterns that can be valuable in estimating future demand. By looking at how sales have performed over time, businesses can identify which factors drove growth or decline and use these insights to project future figures more accurately.

Utilizing historical data allows for the incorporation of various influencing elements that have been quantified, making the forecasts more reliable compared to relying on guesswork or subjective judgments. This method also enables businesses to test various scenarios and adjust their strategies based on real evidence, thereby minimizing risks associated with uncertainty in sales performance.