Embedded Files
Many leaders feel stuck. They get a flood of dashboards and reports, but they struggle to connect the numbers to business strategy.
They know intuition is not enough, but they fear making a wrong decision based on bad data.
The goal is to move from "so what?" to "now what?". The good news? You do not need to be a data scientist to make confident, data-driven forecasts.
You can use simple tools and methods you already have. This guide will show you how to use three simple forecasting models in Google Sheets to make smart business decisions.
From Report to Recommendation: Watch the Video
From Report to Recommendation: Watch the Video
You get the reports, but now what? It is time to turn those numbers into a plan for action. By using a simple forecasting model, you can confidently make decisions and lead your team with a clear plan.
3 Simple Forecasting Models in Google Sheets
3 Simple Forecasting Models in Google Sheets
Guessing or estimating the future is a key part of leadership. It is how you plan for demand, sales, and budgets. Relying on gut feel alone is a risk. But what if you could combine your experience with a data-driven approach?
Here are three easy ways to create a forecasting model using Google Sheets.
1. The Naive Model (or Previous Period Model)
1. The Naive Model (or Previous Period Model)
This is the most basic approach to forecasting. You simply take the sales from the previous period and apply it to the next period. This is a simple forecasting demand method that gives you a quick baseline. It helps you ground your gut feel in real data.
The benefit is its simplicity. The risk is that it does not account for growth or seasonality.
You can also use a slight variation: take the previous period's sales and add a percentage to it (e.g., 5% or 10%). This simple adjustment can provide a slightly more forward-looking estimate if you anticipate growth.
2. The Moving Average Model
2. The Moving Average Model
This is a step up from the naive model and is a common forecasting method in operations management. It smooths out the peaks and valleys in your data, giving you a clearer trajectory.
The moving average model works by taking a set period of time (like three months) and averaging the sales from that period. You then use that average as your forecast for the next period.
For example, to forecast your sales for November, you would take the average of the sales from August, September, and October. When you need to forecast for December, you use the average of September, October, and November.
This type of forecasting model provides a smoother, more stable prediction than the naive model.
3. The Linear Regression Model (Using the FORECAST Function)
3. The Linear Regression Model (Using the FORECAST Function)
Did you know that Google Sheets has machine learning built into it? You do not need to be a data scientist to use it.
The FORECAST function in Google Sheets uses linear regression to create a trend line. This is a powerful forecasting model that predicts the next period based on all past data, not just the previous few months.
This method is ideal if your business has a clear, long-term trend. It can help you see where your business is headed, so you can plan with confidence.
This is a great tool for leaders who want to stop second-guessing their decisions.
By using a function like FORECAST, you can move beyond simple guesswork and ground your plans in a predictable data trend.
This helps you communicate more effectively with your team and leadership, showing them not just what the data says, but what it means for your business.
Key Bites (TL;DR)
Key Bites (TL;DR)
To stop guessing, use a simple forecasting model to ground your business decisions in data.
The naive method is simple: take the last period's sales and use it as your forecast.
The moving average model smooths out data to provide a more stable prediction.
The FORECAST function in Google Sheets uses a powerful linear regression model to predict future trends.
You do not need to be a technical expert to use these methods.
FAQs
FAQs
What is the main difference between the naive and moving average models?
The naive model uses only the most recent data point, while the moving average model uses the average of several recent periods to create a smoother, more stable forecast.
How do I know which forecasting model to use for my business?
The best model is the one that is most accurate for your specific data. Start with the simpler models and see how well they predict your past data before moving to more complex ones.
Do I need to be good at math to use these methods?
No. The beauty of Google Sheets is that it does the heavy lifting for you. You just need to understand the basic concept and how to apply it.
Does the FORECAST function account for seasonality?
The basic FORECAST function in Google Sheets does not account for seasonality, but there are more advanced models that do.
How does this help my career?
Learning to confidently use data to make strategic decisions helps you become a more effective and trusted leader.
Page updated
Report abuse