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What is Forecasting?
Across industry verticals, all businesses face the challenge of preparing for an uncertain future. Corporate executives are responsible for the planning and allocation of resources to optimize growth and meet the demands of the business, a task that grows in difficulty with an increasingly complex business environment.
To help generate accurate predictions of what will happen in the future, and to support the informed and effective allocation of resources, executives use a data analysis technique known as forecasting.
Forecasting uses current and historical data as the basis for predictions about future events. There are three types of forecasting that are commonly used to make predictions about the future in a business context:
General Business Forecasting
Forecasting can be used to assess market conditions and to quantify the health and value of a target market. Organizations may attempt to estimate future sales, expenditures, profits, and liabilities. They may also attempt to measure or evaluate economic trends and position themselves to take advantage of anticipated marketing opportunities. General business forecasting can leverage historical data, or it can be based on intuition or qualitative analysis.
Sales & Marketing Forecasting
Sales and marketing represent two sources of revenue for the business. The sales team produces revenue with outbound efforts to connect with potential customers, while the role of marketing is to engage audiences with content, targeted advertising and other initiatives that generate inbound leads. Forecasting sales and marketing revenue is a crucial capability for organizations that feed directly into internal budgeting and resource allocation planning.
Capital forecasting is simply financial planning for businesses. A business uses capital forecasting to anticipate its future revenue (based on anticipated revenue from sales, marketing, and other revenue streams), ensure that it can meet upcoming financial liabilities and to optimize investment in growth. Capital forecasting helps organizations optimize their resource allocation and accelerate growth while ensuring appropriate cash flow management.