please give a detailed method to forecast the revenue of a new ERP product?

Question

please give a detailed method to forecast the revenue of a new ERP product (to be launched)? it's really a formidable job!!!thank you very much.

Answer 1

The ERP software is supposed to help!

Is this a brand new product that you plan to launch-with no history. Under that scenario you will have to go through the overall similar product demand and make an assumption of the market share that you might garner. If the overall demand for the product is 1000 units at $100 say- per month. The revenue stream is $100,000 a month. If you think the marketing can get 5% of the share to begin with the revenue is then $5000 per month.

If this is an existing product there are several forecasting methods. None will guarantee a 100% success.

The simplest is mean average method. You take a historical data say 3 years and compute the mean of the data and project with whatever growth rate you plan to implement.

You have several smoothing technics to smooth out the ups and downs like seasonality, special promos etc.

The second method is in computing the mean average deviation. What this does is identifying the deviation from the mean on a periodic basis and factor that to the mean.

Same as above but you also use standard deviation technics also to assess the mean and the deviation. This is a much stronger forecast technic since you can statistically assess the confidence levels and customer service levels in forecasting the revenues.

Regression technic is also another statistical method to forecast. It is beyond the scope of this forum to discuss that in detail.

It is not difficult. Again remember it is a forecast under ideal conditions. Key factors impacting the forecast - Product shipments on time, business conditions, overall economy, seasonality, competition, product acceptance, image, etc are some of the variables that would impact the forecast.

Good luck.