Although the past doesn't really predict the future, it sure helps. Sometimes you can find past data on a market and use it to project into the future. The principle of using past data as a guideline for the future is one of the fundamentals of forecasting.
It's particularly important for market forecasting, however, because you'll frequently find ample data about the recent past of your market even when you can't find a market forecast. Using the past data will get you a good starting point and a sense of the reasonableness of your forecast.
Starting with Past Data
For example, say I want to project the market for restaurant equipment in Lane County, Oregon. I can go to the U.S. Census Bureau County Business Patterns to find out that Lane County had 611 eating and drinking places in 1993 and 639 in 1996. I used this example earlier to show calculations of compound growth rates.
I don't particularly like the fact that these numbers are several years old, but they are the latest available and they are also better than any other numbers I can find. I could count eating and drinking establishments by using the yellow pages in the telephone directories, or some other means, but any alternative would be impractical and expensive. So I accept the latest available census data. I calculated the growth rate for 1993 to 1996 and applied that same rate into the future to create a market forecast.
Sample from Web Strategy Pro
Adding Common Sense and Educated Guessing
Is this the best I can do? Maybe not. I can probably take the past data as a base number, and then add my own research and common sense to improve on it. For example:
- I could contact the local Chamber of Commerce or restaurant association and ask for an expert opinion about the fate of eating and drinking establishments in the recent past and foreseeable future. If the local expert says there has been a boom in restaurants, or a problem with restaurants, then I can use that information to change my growth rate. I could adjust it up or down. In my web plan text I would explain what the past growth rate was and why I was expecting it to change.
- I could also find economic growth numbers--I'd check with the Chamber of Commerce or the local governments--to compare general economic health in the 1993-1996 period to the 1996-2000 period and the projections for the foreseeable future. I would then revise my projected growth rate accordingly, and explain in my text about the source of the growth rate figure.
The important point is that I didn't have to just take a wild guess about the restaurant population. By starting with past numbers I improve the overall quality of the forecast. This is mainly just common sense and educated guessing.
