Forecasting requires one to determine the amount of revenue that the business is anticipated to receive over a specified time frame. There are a number of factors to take into account including historical data; anticipated cost of raw materials, distribution and storage; sales marketing plans; seasonal changes; market trends; competition; and economy.

Historical data involves the identification of recurring sources of revenue, for the case of ongoing businesses. This can be developed using sound assumptions derived from historical purchasing patterns. For start up businesses, there is no history of data, which implies that there is the need to initiate relevant and thorough research to create a business activity for the projection. Research can involve competitor analysis, probable customer surveys and market tests. Assumptions must be made; nevertheless, the more they are tested rigorously, the greater the likelihood of the assumptions offering s sound platform to base the calculations.

The anticipated cost of raw materials, distribution and storage involved an analysis of the potential changes in the likely cost of raw materials, and their respective costs on storage and distribution. This information can be obtained from a supplier. With regard to marketing plans, a business owner might make the decision to increase marketing activity, which could have an effect on the projections of the business activity. Seasonal changes should also be taken into consideration, especially when the product or services offered are seasonal. The effect of seasonal sales on revenue should be taken into consideration when drafting projections.

Market trends are also an important factor to consider when making business projections. Changes in trends are likely to affect consumer preferences, which implies a change in the demand for goods and services that is likely to affect the projected business activity.

Competitors also impose significant impact on business activity. The entry of a new competitor could lead to decline in sales whereas the exit of a competitor could lead in an increase in sales. Such factors should be taken into account when projecting business activity.

Lastly, the economy has a considerable effect on business activity. A stable economy means increased business activity whereas an unstable economy means reduced business activity. Business journals and media are the potential sources of economic information that may affect projected business activity.