Projection of Past Sales

The projection of past sales method of sales forecasting takes a variety to forms. The simplest is to set the sales forecast for the coming year at the same figure as the current year’s actual sales, or the forecast may be made by adding a set percentage to last year’s sales, or to a moving average of the sales figure for several past years. For instance, if it is assumed that there will be the same percentage sales increase next year as this year, the fore-caster might utilize a naïve model projection such as

Next year’s sales = this year’s sales x this year’s sales

last year’s sales

This year’s sales are inevitably related to last year’s. Similarly, next year’s sales are related to this year’s and to those of all preceding years.

Projecting present sales levels is a simple and inexpensive forecasting method and may be appropriate for companies in more or less stable or “mature” industries — it is rare in such industries for a company’s sales to vary more than 15 percent plus or minus from the preceding year.