No business person will ever possess the ability to forecast future sales with 100 percent accuracy. No matter one’s level of education or work experience, variables that bakery owners, managers and accountants can’t control will continuously shift up and down. Trends will go in and out of favor, employees might come and go and the economy might change without warning, but bakeries still need to write out sales forecasts to the best of their abilities, making it as accurate as possible regularly.

Importance
Sales forecasting has the ability to improve several areas of operation in the retail bakery. By creating a sales forecast, bakeries can predict cash flow, monitor prices and control operating costs with a higher degree of confidence and accuracy. For the launch of new and promising products, a sales forecast will provide a base for planning and execution. Sales forecasts will also help with human resources planning by allowing the avoidance of surprise layoffs or needing new hires to meet with unforeseen business demands.

An argument can be made that without incorporating accurate sales forecasts into decision making, businesses can create many serious problems in the future, says Namrita Singh of Trianz, a business strategy execution company in the Silicon Valley.

Getting Started
The first step to writing an accurate sales forecast involves breaking down your product categories. To start, don’t worry about individual flavors, just set up your products by what they are. For example, use cakes, cupcakes, muffins, cookies, donuts, etc.

Once you have your product breakdown, start forecasting by month. If you have access to past sales data, use the most recent data as an aid. Statistical analysis techniques exist that will project past data into the future. However you can get close to the same results by projecting your two most recent years of sales by month on a line chart and then visually tracking it forward along the same line. Statistical tools are a nice addition, but they're rarely as valuable in a business plan as human common sense, particularly if it's guided by analysis.

Once you have figured out a monthly forecast, take that forecast and project it into the next year or two years at least. Taking your projections five years into the future provides a great template as you will be adjusting according to unforeseen variables. You’ll also be compiling new data to use as the months go by.

Prices
Once you’ve projected your unit sales by category monthly for twelve months, and then annually, now write a projection for your prices. Think of this as a simple spreadsheet that adds the units of different sales items in one section, then sets the estimated prices in a second section. A third section then multiplies units times price to calculate sales. The math is simple--the hard part is making that estimated guess of unit sales.

Tips

Multiple data sets - Management and ownership need to approach sales forecasting from a few different angles, get more than one set of numbers, and then create a cohesive, singular picture from the data. For example, couple an overall forecast with individual product forecasts. Then look at revenue versus cost forecasts. Use all these to make the best educated guess possible.

Be flexible - Sales forecasting is not an exact science. Make it your priority to put a manageable system in place that you can modify and reevaluate regularly. In addition to using sales history, think about customer history, production history and many of the variables that constantly change.

Visit often - Review your sales forecasts on a regular basis. Set aside time every month, or however often fits with your business, to go over and adjust forecasts accordingly. All involved should look at, compare and plan for results.