business plan and sales forecast

• Data Enrichment
• Chrome Extension
• Email Verification
• Technographics
• Email Finder
• Intent Data
• Case Studies
• Affiliate Program
• Help Center

How to Create a Sales Forecast (Examples & Templates)

Every business needs management tools to maximize performance and keep everything running smoothly. A sales forecast is a critical tool that businesses use to measure their progress and check everything is going to plan. Here’s a closer look at why sales forecasts are important and how to create them. We have some great templates for you, too.

What Is a Sales Forecast – And Which Factors Impact It?

Sales forecasts are data-backed predictions about the sales volume a business will experience over a specific period.

A sales forecast is very important because it provides the foundation for almost all other planning activities. Businesses will rely on accurate sales forecasting to better understand how they should plan financially and execute their game plan .

This means that sales forecasts have the potential to make or break a business.

As with anything in life, though, nothing is certain. Sales forecasts can be affected by a range of factors. This means that businesses have to prepare for any and all eventualities.

Here’s a look at some of the factors that can affect sales forecasting:

A lack of sales history

Sales forecasts are often built using historical data. Businesses analyze previous results to extrapolate and create predictions. If a business starts and lacks a good body of historical sales data, it will struggle to create an accurate sales forecast.

The type of business

Each industry has its series of unique challenges and quirks. Those factors are sometimes unpredictable and could affect a business’s revenues. The ad tech industry, for instance, is often rocked by new data privacy regulations.

Outside factors

Some businesses find that everything is moving according to plan before blindsiding by an unpredictable event they cannot control. Consumer earnings may plummet, for instance, and cause people to restrict their spending.

Inside factors

Some businesses are forced to change their pricing or payment structures. This new dynamic can often have unpredictable effects and cause a business to veer off course from what its sales forecast predicted.

Why Should You Establish Sales Forecasts?

Sales forecasting is essential for every business. Here are some of the key reasons.

Perform accurate financial planning

Sales forecasts help the CFO and financial team understand how much cash is going to be coming into a business. This gives businesses a better understanding of how they can use that capital and makes it possible to calculate what profit they can expect over a given period .

Plan sales activities

A sales forecast can help executives with sales planning. Those executives will understand how many salespeople to employ, for instance, and which quotas and targets to attribute to each of those salespeople. This means that an accurate sales forecast can help salespeople to understand and hit their objectives.

Coordinate marketing

A sales forecast will have a big impact on marketing. For instance, the sales forecast might show that sales are waning, and a bigger investment needs to be placed within marketing. It might also show that a particular product or service fails to deliver appropriate amounts of value.

Control inventory

A sales forecast gives businesses a good understanding of how much inventory they will need to purchase and retain. This is an important factor; it helps businesses balance overstocking and running out of materials. This is also true for SaaS businesses needing customer support and success.

Avoid fluctuations in price

An accurate sales forecast helps businesses maintain consistent product and service pricing. A poor sales forecast might mean a business is forced to adjust its pricing unpredictably. This tactic is often the result of panic; without the proper strategy, it jeopardizes a business’s profitability.

How to Forecast Sales – The Best Sales Forecasting Methods

Businesses around the world use a range of sales forecasting techniques. Here’s a closer look at some key methods you could use.

Opportunity Stage Forecasting

What is it?

This sales forecasting technique calculates the likelihood of deals closing throughout a pipeline.

Most businesses use a sales pipeline divided into a series of sections. The likelihood of converting a prospect increases the deeper the prospect moves into the sales process. To get the most from this technique, the team must dig into the current performance of the sales team.

After that analysis, the probabilities might look something like this:

• Sales Accepted lead : 10% probability of closing
• Sales Qualified Lead : 25% probability of closing
• Proposal sent : 40% probability of closing
• Negotiating : 60% probability of closing
• Contract sent : 90% probability of closing

Using these probabilities, you can extrapolate an opportunity stage sales forecast. You’ll want to take the deal’s potential value and multiply that by the win likelihood.

Who should use it

This is a great sales forecasting method if you have access to historical data, lots of leads in your pipeline, and you need a quick estimate. It’s important to understand that this isn’t the most accurate option, given that many random factors affect those probabilities.

Length of Sales Cycle Forecasting

This sales forecasting method finds the average length of your sales cycle. This helps you predict when your deals will likely close and reveal opportunities for your sales team to expedite the sales cycle.

This method is simple. You can find the length of your average sales cycle using the following basic formula:

Total # of days to close deals / # of closed deals

Let’s imagine, for instance, that you find the following:

• Deal 1: 28 days
• Deal 2: 15 days
• Deal 3: 50 days
• Deal 4: 38 days

We closed four deals, and it took 131 days to close them all together. This means that the average length of our sales cycle is 33 days.

Equipped with that information, we can look at our pipeline and estimate how likely we are to close deals based on how old they are. The closer a deal moves toward the average sales cycle length, the more likely it will be closed.

This is a great sales forecasting method for sales managers who want to learn more about the deals spread across their pipeline. For instance, they can use this method to differentiate between different types of groups.

Sales managers might find that the average sales cycle length is much shorter for web leads, for example, when compared to email leads.

Historical Forecasting

Historical forecasting is a very quick and simple sales forecasting technique. The process involves looking back at your previous performance within a certain timeframe and assuming that your future performance will be superior or at least equal.

This is a useful reference because it helps you to get to grips with seasonality and the outside factors that affect your sales. You might find, for instance, that the holidays are a particularly slow time for your business, and looking at historical data can help you to prepare.

With that said, historical forecasting has its issues. It assumes that buyer demand will be constant, which is no longer a given. This could mean you overestimate your sales statistics and use an accurate sales forecast.

This forecasting method is ideal for a business that needs a quick and easy way to project how much it will sell over a given period. That said, historical data should be used as a benchmark instead of the foundation of a sales forecast.

Lead Pipeline Forecasting

This time-consuming sales forecasting method involves reviewing each lead within your pipeline and determining how likely the deal will be closed. That likelihood is determined by exploring factors like the value of the opportunity, the performance of your salespeople, seasonality, and more.

This is a time-consuming method, and it often makes sense for businesses with fewer high-value leads – it wouldn’t necessarily be efficient or make much sense for a SaaS business, for instance.

The big benefit of this method is its accuracy. If you have reliable and rigid data to base your analysis on, you will find that this method can give you a deeper insight into each lead.

This method makes sense for those businesses that have a lower number of leads. Inside salespeople, for instance, will want to get a clearer picture of every lead within their pipeline. This method isn’t appropriate for SaaS businesses that operate according to volume.

Test Market Analysis Forecasting

Businesses often launch exciting new products and services. But it can be difficult to get accurate sales forecasts without historical data . Test Market Analysis forecasting is the process of developing a product or service and introducing it to a test market to forecast sales and get an approximation of future sales.

This limited rollout allows businesses to track the performance of the new offering and monitor things like consumer awareness, repeat purchase patterns, and more. This is a data-gathering exercise, and it feeds businesses with the information they need to create accurate sales forecasts.

This approach is perfect for those businesses that need to perform real-world experiments to gather useful information. A new business can use sales forecasting to use its sales data to predict where future sales can come from. This can limit the cost since it’s an effective way of having a busy sales pipeline. The limited rollout of the product is also useful from a product perspective, given that adjustments can be made according to feedback.

A big issue with this form of forecasting is that one test market may not be like the others. Your data might not reflect the wider reality, so you must make prudent choices that provide you with accurate information.

Multivariable Analysis

As the name suggests, this method calls upon analyzing a range of variables to get the clearest picture possible. This means that if the method is performed well, it can often provide the most accurate forecast.

If you use this technique, you will want to bring together factors like the average length of your sales cycle, the performance of your salespeople, historical forecasting, and more.

The success of this method hinges upon two key factors within your business: 

• the accuracy of your salespeople and their reporting
• the quality of the forecasting tools that you use.

Both of these factors must be in place to make sure this forecasting method has the best chance of success.

Multivariable forecasting is most appropriate for larger and well-organized businesses, as it uses the data and tools necessary to blend various forecasting methods into one. This could be it if you need the most accurate forecast method possible.

Intuitive Forecasting

Your salespeople are on the front; their experience is very valuable. They often have a good idea of how likely they are to close a particular deal and can use educated guesses to assess the situation.

Experienced salespeople can take emotion out of the equation and rely on their experience and knowledge to make accurate predictions. Some businesses decide to incorporate those gut instincts into the way that they forecast a particular sale.

Some businesses, for instance, will add a score to the conversion probability of their various prospects according to the gut feeling of their salespeople.

This intuitive forecasting method is particularly useful for businesses that lack historical data. Without the quantifiable data to provide the basis for your sales forecasting, you might have to turn to more qualitative assessments from your salespeople.

The downside of this sales forecasting method is clear, though. These assessments are highly subjective, and you might find that your salespeople are often more optimistic in their projections. This means those projections should be taken with a pinch of salt, but they are better than nothing.

Sales Forecast Examples

We know the theory, but how about the practice? In these awesome examples, let’s take a closer look at what those sales forecast methods look like.

Standard Business Plan Financials

This example from Tim Berry (chairman and founder of Palo Alto Software) looks at what a startup sales forecast might look like .

Tim sets the scene and describes Magda’s situation – she wants to open a small café in an office park.

He goes on to show how Magda would establish a base case, estimate her monthly capacity, and what type of sales she could expect. To wrap up, she goes through her month-by-month estimates for her first year and estimates her direct cost.

This is a great exercise and unmissable reading for new entrepreneurs dreaming up a new venture.

Sales Forecast Guide by Toptal Research

This simple sales forecasting guide from Toptal Research also includes a simple example that forms the basis of the guide. These simple visuals and data will give you a good idea of how you can put your sales forecasting efforts together and what it will look like.

This example also shows that you can attractively forecast sales and inform the sales teams. Sales forecasting doesn’t have to be boring columns of data, but you can bring your sales forecast to life with colorful visuals.

Detailed Sales Forecast by Microsoft

This detailed sales forecast template from Microsoft makes it simple for you to estimate your monthly sales projections.

The formula comes with pre-built formulas and worksheet features that result in an attractive and clear template. The template also relies on a weighted sales forecasting method based on the probability of closing each opportunity.

Even if you do not use this exact template, it’s a great file to use. It can give you a great idea of the information you need to include and how it might come together in a spreadsheet format.

Sales Forecast Templates

Looking for your own sales forecast templates to get a running start? Here’s a look at some of the most practical and useful templates.

Sales Forecast Template for Excel by Vertex42

This free sales forecast template helps you keep a handle on key information like unit sales, growth rate, profit margins, and gross profit.

The template is already set up to help you compare and analyze a range of products and services on a monthly basis. The chart also includes a range of sample charts that can be used to effectively and accurately communicate the contents of your sales forecast.

The same worksheet can be used to create monthly and yearly forecasts. You can play with the template to find your desired view and information. 

Sales Forecast Template by Freshworks

This simple forecasting template helps you to put together an effective sales forecast. This finished product can then be used to grow your revenues and hit your quotas.

This template is particularly effective for small businesses and startups that need to project sales and prioritize deals at the early stages of their business. Freshworks also explains that the template can help businesses achieve a higher rate of on-time delivery and accurate hiring projections.

The free sales forecast template is very intuitive to use. Again, it’s great to flick through the spreadsheet to understand what you need in a sales forecast and how it can be put together.

Free Sales Forecast Template by Fit Small Business

This sales forecast template is perfect if your CRM doesn’t currently offer built-in sales forecasting. This template can help you create a forecast from scratch that is adjusted to your own particular needs much quicker.

The template is available in various formats, including PDF, Excel, and Google Sheets. This is great news if you create your small business on your own terms and have limited software access .

Again, this template is clear and simple to use. All of the fields are explained within the spreadsheet – you don’t have to worry about going elsewhere to find definitions.

Sales Forecasting Tools

Looking for sales forecasting tools to take your activities to the next level? Here’s a look at some of the standout options.

Pipedrive is a sales CRM that is designed for salespeople by salespeople. It is a robust CRM that includes all of the features a sales team needs to achieve sales success and grow their business.

The tool also includes a forecasting tool. This tool acts as a personal sales manager that helps salespeople to choose the right deals and activities at the right time. This helps salespeople to become better closers.

By all accounts, this function is very useful for salespeople and managers alike. The forecasting tool can also be customized to match the specific needs of salespeople.

Smart Demand Planner

Smart Demand Planner is a consensus demand planning and statistical forecasting solution that understands how accurate critical forecasts are to a business.

The tool was built on the premise that forecasts are often inaccurate and can cause various issues. Moreover, the traditional sales forecast often resides within a complex spreadsheet that is difficult to use, share, and scale.

The tool aims to fix those issues by aligning strategic business forecasting at all levels of your hierarchy. Smart Demand Planner offers a statistically sound objective foundation for your sales activities.

amoCRM is an easy and smart sales solution that focuses on the world of messenger-based sales. The platform understands the popularity and potential of messenger apps, so it offers a whole new way of using the channel to create valuable relationships.

The tool also includes visual, real-time reports that give salespeople and managers powerful insights. These analytics can be used to set targets and also forecast future sales. What’s more, they can measure performance and identify target areas.

The visual look and feel of the platform make this a very intuitive option. It can drive value through accurate forecasting in businesses where messenger-based selling is critical.

As we have seen, forecasts are critical to the success of your business. They can be cost-effective for a new business, keep sales teams and reps informed, and more. However, every business also needs the leads to make those forecasts a reality. Learn more about UpLead today and how our platform can help you to find, connect, and engage with qualified prospects.

Hunter.io Review for 2024: Key Features, Plans, & a Final Verdict

What is Lusha? A Comprehensive Beginner’s Guide (2024)

Apollo.io Integrations: Information to Personalize Your Tech Stack

see uplead in action

Start your free trial today!

Try UpLead free for 7 days.

• Platform Overview
• Buyer Intent
• Knowledge Base
• Search By Industry
• Code Red Safety
• Staffing Future
• Complete Merchant Solutions
• TBM Consulting Group
• Request a Demo

Copyright © 2024 UpLead | All Rights Reserved

• Terms & Conditions
• Privacy Policy
• Cookie Notice
• Do Not Sell or Share My Personal Information

Salesforce is closed for new business in your area.

The Last Guide to Sales Forecasting You’ll Ever Need: How-To Guides and Examples

By Kate Eby | January 26, 2020 (updated August 26, 2024)

• Share on Facebook
• Share on LinkedIn

Link copied

Sales forecasts are a critical part of your business planning. In this comprehensive guide, you’ll learn how to do them correctly, including explanations of different forecasting methods, step-by-step tutorials, and advice from experienced finance and sales leaders.

Included on this page, you'll find details on more than 20 sales forecasting techniques , information regarding how to forecast sales for new businesses and products , a step-by-step guide on how to forecast sales , and a free sales forecast template .

What Is Sales Forecasting?

When you produce a sales forecast , you are predicting what your sales or revenue will be in the future. An accurate sales forecast helps your firm make better decisions and is arguably the most important piece of your business plan. 

A sales forecast contrasts with a sales goal . The former is the realistic representation of what you believe will occur, while the latter is what you want to occur. Forecasts are never perfectly accurate, but you should be as objective as possible when creating a sales forecast. Goals, on the other hand, can be based on optimistic or motivational targets.

Because the sales forecast is critical to business planning, many different stakeholders in a company (beyond sales managers and representatives) rely on these estimates, including human resources planners, finance directors, and C-level executives. 

In this article, you’ll learn about different sales forecasting methods with varying levels of sophistication. The most basic method is called naive forecasting , which uses the prior period’s actual sales for the new period’s forecast and does not apply any adjustments for growth or inflation. Naive forecasts are used as comparative figures for more robust methods.

What Is Sales Planning?

A sales plan describes the goals, strategies, target customers, and likely hurdles for your sales effort. The sales plan defines your sales strategy and the method of execution you will use to achieve the numbers in your sales forecast.

Overview of Sales Forecasting Steps

Your sales forecasting model can ultimately become very sophisticated, but to grasp the basics, you should first gain a high-level understanding of what is involved. There are three primary steps to getting started:

• Decide which forecasting method or technique you will use. Also, determine the time period for your forecast. Later in this guide, we will review different methods of forecasting sales, including how to know which is best for your business.  
• Gather the data to plug into your forecast model. The data points will vary by method, but will almost always include your actual past sales and current growth rate.
• Pick a tool to support your forecasting effort. For learning purposes, you can start with pencil and paper, but soon after, you’ll want to take advantage of digital solutions. Common tools include spreadsheets, accounting software, and customer relationship management (CRM) or sales management solutions.

As you get going, remember not to be overly focused on complex formulas. Do regular reality checks to make sure your sales forecasts accord with common sense. Bounce forecasts off sales reps to get realistic feedback, and revise.

You will likely achieve greater accuracy if you build your forecasts based on unit sales wherever possible, because pricing can move independently from unit sales. Use data if you have it.

Benefits and Importance of Sales Forecasting

Sales forecasting helps your business by giving you data to make decisions concerning allocating resources, assigning staff, and managing cash flow and overhead. Using this data reduces your risk and supports your growth. 

Your sales forecast enables you to predict both short and long-term performance and customer demand for your product. In the short term, having a sales forecast makes it easy for you to spot when actual sales are not meeting estimates and gives you an opportunity to make corrections early in the period.

The forecast guides how much you spend on marketing and administration, and the projections generate your sales reps’ objectives. In this way, sales forecasts are an important benchmark for gauging the performance of your sales reps. 

Sales forecasts also lead to better management of inventory levels. With a good idea of how much product you will sell, you can stock enough to meet customer demand without missing any sales and without carrying more than you need. Excess inventory ties up capital and reduces profit margins. 

In the long term, sales forecasts can help you prepare for changes in your business. For example, you might see that within a few years, your company will require more manufacturing capacity to meet growing sales. To expand capacity, you may need to build a new factory, so now you can start planning how you will pay for it. Predictive sales forecasting is a critical part of your presentation if you are seeking equity capital from investors or commercial loans for expansion. 

In short, sales forecasting helps your business avoid surprises, so you aren’t making decisions in a crisis environment. Companies with trustworthy sales forecasts see a 10 percentage point  greater increase in annual revenues compared to counterparts without, according to research from the Aberdeen Group .

What Makes a Good Sales Forecast?

The most important quality for a sales forecast is accuracy. But, the benefits of accuracy must be weighed against the time, effort, and expense of the forecasting technique.

Useful sales forecasts are also easily understood and often include visual elements, such as charts, graphs, and tables, to make important trends visible. 

Ideally, you can quickly build a highly reliable sales forecast with simple, economical methods. The ultimate forecast method would automatically (i.e., without manual intervention) fetch the relevant data and make predictions using an algorithm finely tuned to your business. 

In reality, the forecasting process is more time consuming and subjective. Sales forecasts often depend on reps’ assessments of how likely their prospects are to close, and perceptions vary widely. (A conservative rep’s 60 percent probability may be understated, while another rep’s 60 percent may be overly optimistic.) 

Sales managers, who are usually responsible for forecasting, spend a lot of time factoring in these nuances and other market factors when calculating forecasts. 

Surprisingly, spending more time on forecasting does not always improve accuracy. According to research from CSO Insights, sales managers who spend 15 to 20 percent of their time producing their forecast had win rates for approximately 46.5 percent of deals. But, when they spend more than 20 percent of their time on forecasting, the win rate declined by more than two percentage points. 

An axiom of forecasting is that accuracy is highest during time periods that are close at hand and lowest during those that are far into the future. Short-term forecasts draw upon the following: deals that are already in the sales pipeline, the current economic environment, and actual market trends. So, the data underlying short-term forecasts is more reliable.

Forecasting for distant time periods requires bigger guesses about opportunities, demand, competitor activity, and product trends, so it makes sense that the forecast becomes less accurate the further into the future you go. (This concept applies to many companies, especially those that are young and growing; the concept becomes more relevant for all businesses at three years and beyond.) Bear this thought in mind when you look at your sales forecast in order to make long-term decisions.

Sales Forecasting Methods: Qualitative and Quantitative

Sales forecasting methods break down broadly into qualitative and quantitative techniques . Qualitative forecasts depend on opinions and subjective judgment, while quantitative methods use historical data and statistical modeling.

Qualitative Methods for Sales Forecasting

Sales forecasting often uses five qualitative methods. These are based on different ways of generating informed opinions about sales prospects. Creating and conducting these kinds of surveys is often expensive and time intensive. These five qualitative methods include the following: 

• Jury of Executive Opinion or Panel Method: In this method, an executive group meets, discusses sales predictions, and reaches a consensus. The advantage of this method is that the result represents the collective wisdom of your most informed people. The disadvantage is that the result may be skewed by dominant personalities or the group may spend less time reflecting.
• Delphi Method: Here, you question or survey each expert separately, then analyze and compile the results. The output is then returned to the experts, who can reconsider their responses in light of others’ views and answers. You may repeat this process multiple times to reach a consensus or a narrow range of forecasts. This process avoids the influence of groupthink and may generate a helpful diversity of viewpoints. Unfortunately, it can be time consuming.  
• Sales Force Composite Method: With this technique, you ask sales representatives to forecast sales for their territory or accounts. Sales managers and the head of sales then review these forecasts, along with the product owners. This method progressively refines the views of those closest to the customers and market, but may be distorted by any overly optimistic forecasts by sales reps. The composite method also does not take into account larger trends, such as the political or regulatory climate and product innovation. 
• Customer Surveys: With this approach, you survey your customers (or a representative sample of your customers) about their purchase plans. For mass-market consumer products, you may use market research techniques to get an idea about demand trends for your product.  
• Scenario Planning: Sales forecasters use this technique most often when they face a lot of uncertainty, such as when they are estimating sales for more than three years in the future or when a market or industry is in great flux. Under scenario planning, you brainstorm different circumstances and how they impact sales. For example, these scenarios might include what would happen to your sales if there were a recession or if new duties on your subcomponents increased prices dramatically. The goal of scenario planning is not to arrive at a single accepted forecast, but to give you the opportunity to counter-plan for the worst-case scenarios.

Quantitative Methods for Sales Forecasting

Quantitative sales forecasting methods use data and statistical formulas or models to project future sales. Here are some of the most popular quantitative methods:

• Time Series: This method uses historical data and assumes history will repeat itself, including seasonality or sales cycles. To arrive at future sales, you multiply historical sales by the growth rate. This method requires chronologically ordered data. Popular time-series techniques include moving average, exponential smoothing, ARIMA, and X11. 
• Causal: This method looks at the historical cause and effect between different variables and sales. Causal techniques allow you to factor in multiple influences, while time series models look only at past results. With causal methods, you usually try to take account of all the possible factors that could impact your sales, so the data may include internal sales results, consumer sentiment, macroeconomic trends, third-party surveys, and more. Some popular causal models are linear or multiple regression, econometric, and leading indicators.

Sales Forecasting Techniques with Examples

In reality, most businesses use a combination of qualitative and quantitative methods to produce sales forecasts. Let’s look at the common ways that companies put sales forecasting into action with examples.

Intuitive Method

This forecasting method draws on sales reps’ and sales managers’ opinions about how likely an opportunity is to close, so the technique is highly subjective. Estimates from reps with a lot of experience are likely to be more accurate, and the reliability of the forecast requires reps and managers to be realistic and honest.

This method can be especially helpful if you do not have historical data or if you are assessing  new prospects early in your funnel. In these cases, a rep’s gut feeling after initial contact can be a good indicator. If you are a manager, you will review reps’ estimates with an eye for any outliers and work with those reps to make any necessary adjustments. 

Here is an example of the intuitive method in action: You manage a team of four sales reps. You go to each one and inquire about the leads they are nurturing. You ask each rep which opportunities they believe they will win in the next quarter and how much those sales will be worth. John, your strongest rep, tells you $175,000. Alice, another strong performer, says $115,000. Bob, who is in his second year at your company, reports $85,000. Jennifer, a recent college graduate, projects $100,000. You calculate the total of those forecasts and arrive at an intuitive forecast of $450,000. However, you suspect Jennifer’s forecast is unrealistic, because she is inexperienced, so you ask her more questions. Based on what you learn, you decide that only half of Jennifer’s deals are likely to close, so you reduce her contribution to $50,000 and revise your total quarterly forecast to $400,000.

Scenarios Method

Scenario forecasts are qualitative and involve you projecting sales outcomes based on a variety of assumptions. This process can also be a helpful business planning exercise, because once you identify major risks or uncertainty for your company, you can develop action plans to deal with these circumstances if they arise.

Scenario forecasts require an in-depth knowledge of your business and industry, and the quality of the forecast will vary with the expertise of the person or group who prepares the estimate.

To create a scenario forecast, think about the key factors that affect sales, external forces that could influence the outcome, and major uncertainties. Then, write a narrative and numerical description of how the scenario would play out under various combinations of these key factors, external forces, and uncertainties.

Here is an example of the scenarios method in action: Your company sells components for military vehicles. You notice that the most impactful things your sales reps do are meeting with procurement officers in the defense departments of major nations and holding factory tours and product demonstrations for them. These are your key factors. 

The external forces are the number of tenders or requests for proposals that military procurement departments announce, and the value of those items. The risk of conflict in various parts of the world, scarcity of your raw materials, and trends in budget authorizations for defense by major countries are your critical uncertainties. 

You look at how your key factors, external factors, and major uncertainties might combine. One scenario might entail the outcome if your reps increased the number of meetings and product events by 20 percent, the value of U.S. tenders launched rose by six percent, and France decreased defense spending by two percent. 

Under this scenario, you might forecast a six percent increase in unit sales resulting from the following: 

• Having more in-person sales contacts should boost sales by five percent based on past performance.
• You can increase revenue by three percent due to greater U.S. tender opportunities and your current market share.
• Major customer France will not purchase anything, reducing sales by two percent.

Sales Category Method

The category forecasting method looks at the probability that an opportunity will close and divides opportunities into groups based on this probability. The technique relies somewhat on intuition, as does the intuitive method, but the sales category method brings more structure and discipline to the process.

The categories that each company uses vary widely, but they correspond broadly to stages in the sales pipeline. These are some typical labels and definitions:

• Omitted: The deal has been lost or the prospect is no longer engaging. 
• Pipeline: The opportunity will not realistically close during the quarter.
• Possible, Best Case, Upside, or Longshot: There is a realistic possibility that the deal could close at the projected value in the quarter if everything falls into place, but this is not certain. Overall, fewer than half of the opportunities in this group end up closing in the quarter at the planned value.
• Probable or Forecast: The sales rep is confident that the deal will close at the planned value in the quarter. Most of these opportunities will come to fruition as expected.
• Commit or Confident: The salesperson is highly confident that the deal will close as expected in this quarter, and only something extraordinary and unpredictable could derail it. The probability in this category is 80 to 90 percent. Any deal that does not close as forecast should generally experience only a short, unanticipated delay, rather than a total loss.
• Closed: The deal has been completed; payment and delivery have been processed; and the sale is already counted in the quarter’s revenue. 

To compile your forecast, look at the combined value of the potential deals in the categories under three scenarios:

• Worst Case: This is the minimum value you can anticipate, based on the closed and committed deals. If you have very good historical data for your sales reps and categories and feel confident making adjustments, such as counting a portion of probable deals, you may do so, but it is important to be consistent and objective.
• Most Likely: This scenario is your most realistic forecast and looks at closed, committed, and probable deal values, again with possible adjustments based on historical results. For example, if you have tracked that only 60 percent of your probable deals tend to close in the quarter, adjust their contribution downward by 40 percent.
• Best Case: This is your most optimistic forecast and hinges on executing your sales process perfectly. You count deals in the closed, commit, probable, and possible categories, with adjustments based on past performance. The possible category, in particular, requires a downward adjustment.  

As the quarter or period progresses, you revise the forecast based on updated information. This method can quickly get cumbersome and time consuming without an analytics solution.

Here is an example of the sales category method in action: You interview your sales team and get details from the reps on each deal they are working on. You assign the opportunities to a category, then make adjustments for each scenario based on past results. For example, you see that over the past three years, only half the deals in the possible category each quarter came to fruition. Here’s what the forecast looks like:

Top-Down Sales Forecasting

In top-down sales forecasting, you start by looking at the size of your entire market, called the total addressable market (TAM), and then estimate what percentage of the market you can capture. 

This method requires access to industry and geographic market data, and sales experts say top-down forecasting is vulnerable to unrealistic objectives, because expectations of future market share are often largely conjecture.

Here is an example of top-down sales forecasting in action: You operate a new car dealership in San Diego County, California. From industry and government statistics, you learn that in 2018, 112 dealers sold approximately 36,000 new cars and light trucks in the county. You represent the top-selling brand in the market, you have a large sales force, and your dealership is located in the most populous part of the county. You estimate that you can capture eight percent of the market (2,880 vehicles). The average selling price per vehicle in the county last year was $36,000, so you forecast gross annual sales of $103.7 million. From there, you determine how many vehicles each rep must sell each month to meet that mark.

Bottom-Up Sales Forecasting

Bottom-up sales forecasting works the opposite way, by starting with your individual business and its attributes and then moving outward. This method takes account of your production capacity, the potential sales for specific products, and actual trends in your customer base. Staff throughout your business participates in this kind of forecasting, and it tends to be more realistic and accurate. 

Begin by estimating how many potential customers you could have contact with in the period. This potential quantity of customers is called your share of market (SOM) or your target market . Then, think about how many of those potential customers will interact with you. Then, make an actual purchase.

Of those who do purchase, factor in how many units of your product they will buy on average and then how much revenue that represents. If you aren’t sure how much your customers will spend, you can interview a few. 

Here is an example of bottom-up sales forecasting in action: Your firm sells IT implementation services to mid-sized manufacturers in the Midwest. You have a booth at a regional trade show, and 3,000 potential customers stop by and give you their contact information. You estimate that you can engage 10 percent of those people in a sales call after the trade show and convert 10 percent of those calls into deals. That represents 30 sales. Your service packages cost an average of $250,000. So, you forecast sales of $7.5 million.

Market Build-Up Method

In the market build-up method, based on data about the industry, you estimate how many buyers there are for your product in each market or territory and how much they could potentially purchase. 

Here is an example of the market build-up method in action: Your company makes safety devices for subways and other rail transit systems. You divide the United States into markets and look at how many cities in each region have subways or rail. In the West Coast territory, you count nine. To implement your product, you need a device for each mile of rail track, so you tally how many miles of track each of those cities have. In the West Coast market, there are a total of 454 miles of track. Each device sells for $25,000, so the West Coast market would be worth a total $11.4 million. From there, you would estimate how much of that total you could realistically capture.

Historical Method

The historical sales forecasting technique is a classic example of the time-series forecasting that we discussed under quantitative methods. 

With historical models, you use past sales to forecast the future. To account for growth, inflation, or a drop in demand, you multiply past sales by your average growth rate in order to compile your forecast. 

This method has the advantage of being simple and quick, but it doesn’t account for common variables, such as an increase in the number of products you sell, growth in your sales force, or the hot, new product your competitor has introduced that is drawing away your customers.

Here is an example of the historical method in action: You are forecasting sales for March, and you see that last year your sales for the month were $48,000. Your growth rate runs about eight percent year over year. So, you arrive at a forecast of $51,840 for this March.

Opportunity Stage Method

The opportunity stage technique is popular, especially for high-value enterprise sales that require a lot of nurturing. This method entails looking at deals in your pipeline and multiplying the value of each potential sale by its probability of closing. 

To estimate the probability of closing, you look at your sales funnel and historical conversion rates from top to bottom. The further a deal progresses through the stages in your funnel or pipeline, the higher likelihood it has of closing.

The strong points of this method are that it is straightforward to calculate and easy to do with most CRM systems. 

But, opportunity-stage forecasting can be time consuming. 

Moreover, this method doesn’t account for the unique characteristics of each deal (such as a longtime repeat customer vs. a new prospect). In addition, the deal value, stage, and projected close date have to be accurate and updated. And, the age of the potential deal is not reflected. This method treats a deal progressing quickly through the stages of your pipeline the same as one that has stalled for months. 

If your sales process, products, or marketing have changed, the use of historical data may make this method unreliable.

Here is an example of the opportunity stage method in action: Say your sales pipeline comprises six stages. Based on historical data, you calculate the close probability at each stage. Then, to arrive at a forecast, you look at the potential value of the deals at each stage and multiply them by the probability.

Length-of-Sales-Cycle Method

This is another quantitative method that shares some similarities with the deal stage method. However, this model looks at the length of your average sales cycle. 

First, determine the average length in days of your sales process. This figure is also known as time to purchase or sales velocity . Add the total number of days it took to close all of the past year’s deals and divide by the number of deals. Then, calculate the probability of new deals closing in a certain period of time as a percentage of the average sales cycle length. 

With this method, the biases of individual reps are less of a factor than with the deal stage model. Also, with this technique, you can fine-tune the probabilities for different lead types. (For example, prospects referred by current customers may close in an average of 27 days, while prospects who make contact after an online search need an average of 62 days.) But, this technique requires you to know and record how and when prospects enter your pipeline, which can be time intensive.

Here is an example of the length-of-sales-cycle method in action: You review the 37 deals your company won last year and see that they took a total of 2,997 days to close. To calculate the average length of the sales cycle, you divide 2,997 by 37 and see that the average sales cycle lasted 81 days. You then look at the five deals currently in your pipeline.

Lead Scoring Method

This technique requires you to have lead scoring in place. With lead scoring, you profile your ideal customers based on attributes (like industry, size, and location) as well as behavior (such as whether they have recently raised capital or whether the contact person has requested a demonstration of your product). 

You then classify future leads based on how closely they match your ideal customer. You can label the categories with distinctions such as A, B, or C or hot, warm, or cold, or you can assign numbers up to one hundred using formulas that add and subtract points for different attributes and behaviors. (For example, “They requested a demo, which adds 15 points, but they are not in your ideal industry, which subtracts 10 points.”)  

To create your forecast, you then look at the historical close rate for leads in each category and multiply that by the value of the opportunities currently in the group. 

Here is an example of the lead scoring method in action: Your company sells textbooks for advanced math and science. Your ideal customer is a university with at least 25,0000 students that has an engineering school and is located on the east coast. These are your A prospects. B prospects have at least 10,000 students. C prospects have at least 10,000 students, but are located elsewhere in the country.

You then look at the close rates and potential deal values for each lead score. Finally, you multiply the close rate by the potential value of the deals in the category or by your average sales value.

Lead Source Method

This model forecasts future sales based on how you acquired the lead, using the behavior of previous leads as a benchmark.

For example, say your company sells a software application. Some leads come from search traffic to your website; some originate with demonstration requests at conferences, and some are referrals from existing customers. 

Look at your historical data to track the percentage of leads who converted to sales for each lead source. In addition, calculate the average value of a sale for each source. Then, by using the conversion probability and sales values, you can forecast the sales that the leads at the top of your funnel are likely to generate. 

Here is an example of the lead source method in action: Based on source, you compile your historical data and discover the following conversion rates and sales value for leads.

One advantage of this sales forecasting method is that you can project how many leads of each type you would need to generate in order to hit a target. Suppose you have a conference coming up where participants will be able to request demonstrations of your product, and you would like to win an additional $30,000 in sales from the demo leads. Based on the average lead value of $600, you know you will want to generate 50 leads who request demos at the conference. 

One drawback to lead source forecasting is that the method does not account for potential differences in the length of the sales cycle for the lead types. That makes it difficult to pinpoint the period in which the revenue will occur. Therefore, you should do a separate analysis of time to purchase in order to allocate sales to the right period.

Another challenge is that sometimes you may not be sure of the lead source. For example, suppose that another customer has recommended your product to a contact and that that contact decides to first check you out on your website. You might very well assign a lower lead value to this prospect, assuming they will behave like our web-originated leads, when, in reality, they will probably behave more like the customer referral leads. 

Lastly, remember that this method won’t account for changes in your marketing or pricing that influence conversion rates and customer behavior.

Sales by Row Method

This method is a good fit for small businesses that sell different products or services. Rather than forecasting sales for each individual product type, you project sales for categories. 

Each row in your forecast will cover different physical products (such as pick-up trucks, heavy trucks, and delivery vans) and service units (such as hours of labor or service types like replacing a faucet, unclogging a drain, or installing a toilet). 

You can employ this method to forecast units and then factor them by average prices to arrive at revenue. Or, you can look exclusively at revenue. If you sell a subscription service, you can calculate recurring revenue for each product type.

For each row, you would look at how much you sold in the same period a year earlier and then adjust for factors such as inflation, organic growth, new products, increased workforce, or special circumstances.

Here is an example of the sales by row method: You operate a combination fuel station and mini-market. Your forecast would cover the broad categories of your business, such as sales of gasoline, diesel, food, beverages, and sundries.

For March’s forecast, you take into account that the new housing development near your business, which was under construction last year, is now almost completely sold and that there are many more commuters filling up. Your gas sales have been growing by almost 15 percent year over year. Also, in March, there will be a special event at the nearby fairgrounds that could draw thousands of additional vehicles to your area. 

On the downside, a new retail complex with a full-service grocery store has opened nearby, so your sales of food and drinks have slipped. Also, increased congestion in the neighborhood has caused some long-haul truckers who used to stop for fuel to reroute.

Regression or Multivariable Analysis Method

Regression or multivariable analysis is one of the most sophisticated forecasting methods, and allows you to build a custom model combining any factors that you feel are relevant to your sales.

For regression analysis, you need accurate historical data on all the variables under consideration, expertise in statistics, and, for practical purposes, an analytics solution or application that can perform the analysis. 

Because this method incorporates a multitude of influences on your sales, the resulting forecast is the most accurate. But, the costs tend to be high because of the data collection, expertise, and technology requirements.  

Regression analysis looks at the dependent variable (the factor that you are trying to predict, in this case, the amount of future sales) and independent variables (the factors that you believe affect sales results, such as opportunity stage or lead score). 

In a simple example, you would create a chart, plotting the sales results on the Y axis and the independent variable on the X axis. This chart will reveal correlations. If you draw a line through the middle of the data points, you can calculate the degree to which the independent variable affects sales. 

This line is called the regression line , and, by calculating the slope of the line, you can use numbers to represent the relationship between the variable and sales. The equation for this is Y = a + bX. Excel and other software will perform this analysis and calculate a and b for you. In more sophisticated applications, the formula will also include a factor for error to account for the reality that other variables are also at work.

Going further, you can look at how multiple variables interplay, such as individual rep close rate, customer size, and deal stage. Making these kinds of calculations becomes increasingly difficult with simple charts and demands more advanced math knowledge. 

Remember that correlation is not the same as causation. Bear in mind that while two variables may seem closely related to each other, the reality may be more subtle. 

Here is an example of the regression method in action: You want to look at the relationship between the amount of time a prospect has progressed in your sales cycle and the probability of the deal closing. 

So, plot on a chart the probability of close for past deals when they were at various stages of your sales cycle, which lasts an average of 100 days. Deals early in the sales cycle have a low probability of closing compared to those that occur in the later stages of negotiation and contract signing on day 85 and up. (Be sure to eliminate any prospects that stall or disengage at any stage.)

By drawing a line through those points (i.e., the intersection between the sales close probability and the percentage of the average sales cycle), you can see that there is a nearly one-to-one relationship between percentage point increases in time elapsed relative to the average sales cycle and percentage point increases in the probability of closing.

This calculation becomes more complex when you consider multiple variables. Let’s say you have two sales reps working with prospects. Gloria, your best closer, is giving a product demonstration to a new Fortune 500 account. Leonard, a strong performer, whose close rate is a little lower than Gloria’s, is negotiating with a repeat customer, a mid-sized company. 

Your multivariable analysis of these situations could take into account each rep’s average close rate for an opportunity, given the following factors: the specific stage; deal size; time left in the period; probability of close for a repeat customer versus a new customer; and time to close for an enterprise customer with more than 10 people involved in decision making versus a mid-sized business with a single decision maker.

Time Horizons in Sales Forecasting

Choosing the time period for your sales forecast is an important step. Depending on your business, the purpose of your forecast, and the resources you can devote to making forecasts, the time frame you target will vary. 

A short-term forecast will help set sales rep bonus levels for next quarter, but you need a long-term forecast to decide whether you should plan to build a new factory. A startup that has been doubling revenue every year will have more difficulty making a 20-year forecast than a century-old concern in a mature industry. Here are the three time frames for forecasts: 

• Short-Term Forecasts: These cover up to a year and can include monthly or quarterly forecasts. They help set production levels, sales targets, and overhead costs.
• Medium-Term Forecasts: These range from one to four years and guide product development, workforce planning, and real estate needs.
• Long-Term Forecasts: These extend from five to 20 years and inform capital investment, capacity planning, long-range financing programs, succession planning, and workforce skill and training requirements.

Getting Started with Sales Forecasting: What You Need to Know

Regardless of the sales forecast method you use, you generally need to have certain pieces of information and conditions in place. These include the following:

• Well-Documented and Defined Sales Process: You need to understand your customer journey and have an established sequence for nurturing each prospect. Without this, you cannot predict which opportunities are getting closer to purchasing. This structure creates accountability. 
• Consensus on Pipeline Stages: Your sales team needs to have a clear and shared understanding of what you mean by lead, prospect, qualified, possible, probable, committed, and other relevant terms. 
• Definition of Success: Communicate clearly what your sales team is striving for in terms of sales quotas or goals; include these quotas and goals for each individual rep, for the team as a whole, and for conversion through each stage of your pipeline.
• Historical Data: You require benchmarks for data points, such as average time to close, conversion rates, average deal size, lifetime customer value, win-loss ratio, and seasonal sales trends. These sales metrics and KPIs are often critical pieces of your forecast.
• Current Status: Up-to-date knowledge of your pipeline is essential, including how many opportunities are at each stage and the potential value of these sales.
• Forecasting Tools: This will almost always include a CRM application and may also include financial management or accounting software, analytics solutions, and spreadsheets.

Influences and Assumptions in Sales Forecasting

Sales forecasting should not happen in a vacuum. Take into account changes in the business environment and question assumptions, such as that past growth will continue. Also, be sure to factor in your ideas about global economic trends and competitor behavior.

Here are some common factors to consider regarding your sales forecast. Many of these can have either a positive or negative influence on sales. For example, changing reps’ account assignments may reduce sales, because members of your team will have to familiarize themselves with customers that are new to them. However, sales could increase if your new hotshot gets your biggest opportunity.

• Economic Trends: Inflation, growth, consumer sentiment, risk appetite, and purchasing power
• Regulation: Trade policies such as tariffs, duties, and quotas; health, safety, and environmental rulings on products or processes; court decisions; intellectual property disputes; and competition policy
• Seasonal Trends: Cyclical demand fluctuation, production patterns, and variation in raw material availability 
• Competitor Behavior: New product innovations, pricing changes, and market entries and exits
• Business Economics: Selling prices, direct prices, unit costs, gross margins, and the impact of accrual versus cash accounting on when you can book a sale
• Staffing and Compensation: Hiring or firing new reps, changes in leadership, policies on commissions and bonuses, and training
• Territory Management: Redrawing of territories and changes in account assignments
• Products and Services: Product lifecycle, new products and services, user experience, defects, ticket resolution, changes in distribution, and market entries and exits
• Marketing: Demand generation, advertising, pricing, special campaigns, social media activity, and prospecting

Sales Forecasting for New Businesses and Products

If you are starting a new business or launching a new product, your sales forecasts are crucial because they will determine how much you can spend in order to break even. However, when dealing with a new entity, you lack the advantage of historical data, which you need for almost every forecasting technique. 

If you don’t have historical data, you can use industry benchmarks from trade publications, industry associations, and consultants. For example, if you are launching a new recipe app, look at market research on how other cooking apps have performed. 

Dining establishments can look at number of tables, hours of service, and menu prices to estimate average order amounts and table turnover. Retail outlets use square feet, foot traffic, and average selling prices to forecast sales.

If you are adding a new product to your line, you can forecast sales by looking at how your most similar existing product performed at launch. Then, you can make tweaks based on other relevant information, such as that the new product is harder to master than its predecessor, that it is a later entrant into a crowded space, or that it already has a backlog of orders before launch.

New service businesses can base forecasts on capacity, such as number of staff and service hours and how much to charge for the most popular services. Once you have this data, you can make adjustments accordingly.

Michael Barbarita, President of Next Step CFO , works as a contracted CFO to produce sales forecasts for companies. He likes to tie the sales forecast for service businesses to a metric called sales per direct labor hour , which you can calculate this by dividing sales by the working hours of people in the field performing customer work. For example, an electrical contractor would calculate the sales per direct labor hour of its electricians and multiply that figure by the number of electricians and the hours they work.  

For instance, you may decide that operating at half capacity is a good estimate for your first six months in business. Then, you may operate at three-quarters capacity for the second six months. Therefore, you would multiply maximum capacity by average revenue and then multiply that resulting figure by 0.50 and 0.75, respectively.

Quick-Start: Sales Forecasting Formulas

If you are eager to dive in and want to generate some simple sales forecasts, you can make use of basic equations. Here are a few easy ones:

• Simple Forecast with No Organic Growth: This formula assumes that this period will duplicate the prior period, except for the impact of inflation.  Revenue Prior Period) + (Revenue Prior Period x Inflation Rate) = Sales Forecast  
• Historical Plus Growth: This formula helps you reflect current trends.You look at the prior year and then factor it by your recent growth rate. (Last Year Revenue x Percentage Growth Rate) + Last Year Revenue = Sales Forecast
• Partial Year: In this method, you project the rest of the year based on historical patterns and early results. Imagine that you know your sales for the first two months of the year and that last year these months represented seven and nine percent of your sales respectively and totaled $100,000. Using the formula below, you would forecast sales of $625,00 for the year: ($100,000 x 100) ÷ 16 = $625,000. (Current Period Revenue x 100) ÷ Percent That Equivalent Period Represented Last Year = Forecast Sales
• Pipeline Formula: This formula replicates the opportunity stage method that we discussed earlier. You calculate the value of deals at each stage of your pipeline by multiplying the potential deal value by the close probability and adding up the result for each stage. (Deal Amount x Close Probability) + (Deal Amount x Close Probability) etc. = Sales Forecast

How to Make a Basic Sales Forecast Step by Step

Here are step-by-step instructions for a manually generated sales forecast:

• Pick Your Time Period: The way in which you will use your forecast determines the most appropriate time interval, whether that be monthly, quarterly, annually, or on an even longer timeline. If you are making your first forecast, estimating on a monthly or quarterly basis for the upcoming year is a good starting point. Experts suggest doing monthly estimates for the first year and then doing annual forecasts for years two through five. 
• List Products or Services: Write down the items or services that you sell. If you have a lot of them, group them into categories. For example, if you sell clothing, your rows might include shirts, pants, and shoes. Match these revenue streams to the way you organize your accounting. So, if your books look at women’s and men’s clothing separately, do the same for your sales forecast. That way, you can pair your sales forecast with information on your cost of goods sold and overhead to project profit.  
• Estimate Unit Sales: Predict how many units you will sell in the selected time period. If you have historical data, use that and then factor in assumptions about demand for the upcoming period. For example, is your business growing? Is the economy in recession? Did you launch a big promotion? Use the answers to these questions to make downward or upward adjustments to the historical figure. You can also interview some customers to get insights into their likely purchasing plans. Lastly, don’t forget to factor in seasonal fluctuations. 
• Multiply by the Selling Price: Multiply the unit sales numbers by the average selling price (ASP). Determine the ASP by analyzing historical sales and adjusting for inflation and other factors. To obtain this figure, you also need to consider discounts, free trials, and unsold inventory. 
• Repeat for Each Forecast Period: Go through the same calculation for each category and time interval. As you forecast more distant periods, your estimates are likely to be less accurate, so you may want to make a range of forecasts, such as for best, worst, and average scenarios. As time passes, add the actual values and fine-tune your forecast. For instance, you may see that for the first few months of the year, you underestimated sales by 12 percent. Therefore, you decide to increase your forecasted sales amounts in the upcoming months.

How to Forecast Sales in Excel

Here is a step-by-step guide to building your own sales forecast in Excel:

• Enter Historical Data: Open a worksheet and enter your past date data in the first column. Then, in the second column, enter the corresponding sales values. If possible, make sure you space the dates consistently (e.g., the first day of every month). 
• Create Forecast: In the date column, fill out the next date cell with the future date you are forecasting. Select the corresponding sales value cell and in the function field, type: =(FORECAST( A10, B2:B9, A2:A9)), where A10 is the future date cell, B2 to B9 are the historical sales amounts, and A2 to A9 are the historical dates. Hit enter and the forecast sales amount will appear.
• Repeat: Continue the pattern for your remaining future dates. Remember that the formula uses only known variables, so do not add forecasted amounts to the cell ranges. This function is a linear forecasting method.
• Power Up: If you have Excel 2016, you can use the forecast sheet function, which automates forecasting and adds a chart. To use this function, select both data columns, and, on the data tab, click the forecast sheet. In the create forecast worksheet box, select whether you want a line or bar chart. In the forecast end field, choose an ending date and then click create. Excel will create a new worksheet that contains both historical and forecast sales data as well as a visual representation. 

For a pre-made basic sales forecast, download this template that projects product sales with both units and sales amount.

Basic Sales Forecast Sample Template

Excel  | Google Sheets | Smartsheet

For a wide range of pre-built sales forecast templates in a variety of formats, see this comprehensive collection .

How to Choose the Right Sales Forecasting Methodology

Your goal is to build the most reliable forecast possible, with the minimum amount of resources you need to be effective. To choose the method that fits best, consider these seven questions:

• What Is the Purpose of the Forecast? Think about why you need the forecast and what you will do with it. Forecasting methods vary in their accuracy, cost, and ease of execution. If you are using it to set a budget, you will want a high level of accuracy. But, if you are trying to confirm that there is enough demand in a new geographic area to justify entering the market, you do not need as much precision. If the need is urgent, you want a fast technique. If you have time and resources, you may decide your needs are best served by a sophisticated custom model. When you want to model what would happen to sales if you changed one variable, you need a method (such as regression analysis) that can isolate this variable and reliably project the impact. 

• “Consider the purpose of the model and how the results will be used. For example, major decisions with a high degree of impact and uncertainty require more accuracy than those that are low impact or generally more predictable. You also need to consider the data that will be available and the quality of that data,” says Tyson Nicholas, Senior Director of Analytics at HealthMarkets , a national insurance agency. 
• Is the Time Frame Short, Medium, or Long Term? Qualitative methods are a good choice for short-term horizons, but they generally underperform quantitative methods for periods beyond a few months. Similarly, consider where you are in your business or product lifecycle. If you are ramping up or in a high-growth phase, you may be making costly investment decisions, so you need a method with a high degree of accuracy, but also relatively quick production time. When you are in a mature phase of your business, decisions about production and marketing are more routine. 
• How Much Data Do You Have? The less data you have, the more likely you will be to select a qualitative technique. If you have limited data, you will turn toward more simplistic models. A company that has collected a lot of data and has great confidence in its reliability can choose sophisticated quantitative models. 
• How Relevant Will History Be in Predicting the Future?  If your business has undergone big changes, such as launching major new products, experiencing large growth in the sales force, or introducing a different pricing structure, your past results will have less value as a guide to future performance. So, methods that diminish the weight put on historical data and qualitative techniques are a better choice.  
• In Terms of Time and Money, How Much Does It Cost to Produce the Forecast? How Does This Cost Compare to the Value of the Potential Benefits?You will need to make tradeoffs between the time and cost to build your forecast and the potential benefits, such as cost savings. Also, consider the potential cost of error. For example, suppose you are contemplating a high-cost sales-forecasting technique (one that takes a lot of data gathering, the creation of a custom model, and expensive staff and technology to produce). The forecast could allow your company to reduce the amount of inventory it holds. Weigh the value of inventory savings against the forecasting cost. If you reduce inventory and the forecast proves inaccurate, what are the potential costs of lost sales — because you did not stock adequately or because you did not cut back enough?  
• What Degree of Accuracy Do You Need?  Forecast accuracy rises with the cost and complexity of the methodology. Depending on how you will use the forecast, the size of your company, and the variability of your business, you may feel that it’s not cost effective to produce a maximum-accuracy forecast. If you are a giant global company, a fraction of a percentage point error in your sales forecast could represent many millions. So, the bigger the dollar values, the more meaningful every degree of enhanced accuracy becomes.
• How Complex Are the Factors That Will Drive the Forecast?   If your sales dynamic is straightforward — the more sunny days there are, the more beach umbrellas you sell at your beach kiosk — then building a sophisticated, AI-driven forecasting model will be overkill. “It's important not to spend time and energy developing a complex model, when a much simpler one will do the job,” says Nicholas. But when you are facing a subtle and complex interplay of variables, you need a technique that accounts for them. Suppose you have new products, changes in your marketing, and additional sales reps. A sophisticated model would allow you to forecast the net effects and also try out different scenarios in which the variables fluctuated.

Why Accuracy Is Important in Sales Forecasts

According to CSO Insights, 60 percent of forecasted deals do not close and 25 percent of sales managers are unhappy with the accuracy of their forecasts. Inaccuracy in sales forecasts causes problems for businesses and impacts performance. 

People throughout your company depend on your forecasts to make a multitude of decisions — from pay raises to real estate acquisitions. Let’s look at some of the important reasons to strive for accuracy:

• Early Warning: Your sales forecast helps you spot trouble early, like when revenues are not materializing as expected; the forecast also allows you to intervene and problem solve before this underperformance becomes a crisis.
• Decision Making: The forecast gives leaders confidence and a sound basis for deciding how much and where to spend or invest. Production planners, HR, and others will use the forecast.
• Goal Setting: You set achievable targets for sales reps when you have an accurate forecast. Goal setting prevents sales reps from getting discouraged by unrealistic expectations. Following this strategy also ensures that your commission and bonus scale are calibrated appropriately. 
• Customer Satisfaction: When you are prepared for the right level of demand, your company can improve its record of fulfilling orders on time and in full.
• Inventory Management: You will be more likely to have the right level of inventory if your sales forecasts are accurate. Making accurate predictions allows you to better manage your supply chain and order raw materials or parts in a timely fashion. You also gain more control over your pricing if you have the right amount of inventory. When you have to resort to discounting to get rid of excess inventory, your profitability suffers.

How to Improve Sales Forecast Accuracy and More Best Practices from Experts

Producing high-quality forecasts takes organizational commitment and long-term effort, and best practices will help improve accuracy.

”Sales forecasting is both an art and a science. Where companies tend to go wrong is relying too heavily on one or the other. You need a consistent process and reliable data,” says Charlene DeCesare, CEO of sales training and advisory firm Charlene Ignites .

She emphasizes five best practices:

• Ensure that the pipeline feeding the forecast is accurate. You don't need historical data to predict the future when you have a well-defined sales process.
• Everyone must use the CRM, and should enter notes and coding opportunities in a clear, consistent way. 
• Buyer behavior is a much more reliable predictor of future sales than gut feel. Challenge optimism that doesn't align with the applicable stage in the sales cycle or isn't supported by clear, mutually agreed-upon next steps.
• In general, buyer/seller behavior is the leading indicator to rely upon. Too many companies rely on results, which is actually the lagging indicator.
• Sales leadership can have a huge impact. Sales reps must be rewarded for both honesty and accuracy. Sales forecasting must be an individual, team, and company priority. 

Rob Stephens, a CPA whose firm CFO Perspective advises businesses on forecasts, adds: “A big planning mistake is spending too much of your precious time trying to find the one right scenario… Start with a range of reasonable forecasts based on solid fundamentals. For example, you may project from historical growth rates, customer indications of future sales, or projections of market growth. A company with a new product may need to extrapolate from existing products or early indications from potential customers. Use a higher-probability scenario as a beginning base scenario, but identify why the future may deviate from it.”

Common Mistakes and Pitfalls in Sales Forecasts

Sales pros say they see the same sales forecasting errors on a regular basis and that these often relate to letting the discipline of the forecasting process lapse. 

“The most common operational mistakes are basing forecasts on hope rather than evidence, ignoring repeated close date slippage, failing to take into account the historic forecast accuracy (or inaccuracy) of the salesperson concerned, and failing to hold salespeople accountable for the relative accuracy of their forecasts,” notes Bob Apollo, Founder of Inflexion-Point Strategy Partners, a sales training firm.  

“The most common cultural mistake is when sales leaders press salespeople to forecast a target number without any evidence or confidence that it will actually be achieved," he notes.

Evan Lorendo , Director of Revenue Accelerator, which advises service companies on revenue strategies, says he sees companies with monthly recurring revenue (MRR), such as software as a service (SaaS), frequently make mistakes in sales forecasting.

He gives the example of a company with an MRR product that wants to generate $120,000 in revenue a year. How much in new sales do they need each month? “Most of my clients say $10,000/month, but that is wrong. Because a client is paying on a monthly basis, a client that signs up in January is actually paying 12 times during the year. On the flip side, a client signing up in July will make six payments during the year,” he explains. 

That means there are a total of 78 potential payment configurations per year, not 12. The customer who buys in January will make 12 payments, but November’s buyer will make two. (12 + 11 + 10 + 9 + 8 + 7+ 6 + 5 + 4 + 3 + 2 + 1 = 78.)

“If you want to know how much you need to sell in new sales each month to hit that $120,000 goal, the answer is $1,539 ($120,000/78). That actually seems much more manageable, doesn't it? Based on poor forecasting, a miscalculation can turn off good salespeople who can't hit their quota,” he says.

KPIs for Sales Forecasting

As your sales forecasting improves, you reap bigger benefits, such as better planning and higher profits. So, you will want to assess and monitor your forecasting effort by using key performance indicators (KPIs).

Below are the main KPIs for sales forecasting. Some of them draw from statistics concepts, such as standard deviation, and computer applications and statistics guides can help you calculate them.

• Bias or Variance: This KPI tells how much the actual results deviated from the forecast over a given period of time. Calculate bias as an absolute number of dollars or units or as a percent of sales. A positive number means sales exceeded projections and a negative number indicates underperformance. Actual Units - Forecast Units = Bias
• Mean Absolute Deviation (MAD): This metric describes the size of your forecast error in total units or dollars. You calculate how much the actual results deviated from the forecast average, add the deviations, and divide the result by the total number of data points.   
• Mean Absolute Percentage Error (MAPE): This is similar to MAD, but gives the forecast error as a percent of sales volume. 
• Tracking Signal: This is another expression of forecast error and looks at how the error rate varies among forecast values. Normally, you expect all forecast amounts to be wrong by about the same degree. If, from one data point to another, there is a large variation in the error rate, you need to rework your model.  Tracking Signal = Accumulated Forecast Errors ÷ Mean Absolute Deviation
• Forecast Value Added: This metric measures how much better the forecast was than simply using unadjusted historical data. If your forecasting effort got you closer to actual than the so-called naive forecast (i.e., using historical figures as your forecast), you have added positive value. You calculate this metric by comparing the MAPE of your forecast to the naive forecast.
• Linearity: This looks at how sales are paced over the course of the period. As your reps seek to meet quota, you might see a flurry of deals at the end of the quarter. Or, deals might be spread evenly across the time period. The most stable situation is a deal cadence or velocity that is constant. If expressed as a trend line, this stable situation would appear visually as a flat line. This pattern is called highly linear .

Application of Sales Forecasting

Your sales forecast obviously gives you an idea of how much you will sell in the future, but sales forecasting has other important use cases. Here are five ways you can apply your forecast to business questions:

• Sales Planning: As noted earlier, your sales plan encompasses your goals, tactics, and processes for achieving your sales forecast. As part of this plan, your sales forecast helps you decide if you need to hire more sales reps to achieve your forecast and if you need to put more energy and resources into marketing.
• Demand Planning: Demand planning is the process of forecasting how much product your customers will want to buy and making sure inventory aligns with that forecast. In ideal conditions, forecast demand and sales would be virtually the same. But, consider a scenario in which your new product becomes the hot gift of the holiday season. You forecast demand of 100,000 units (the number consumers will want to buy). A large shipment turns out to be defective, and the product is unsellable. So, you forecast sales of just 75,000 units (how much you will actually sell.)   
• Financial Planning: Your sales forecast is vital to the work of your finance department. The finance team will rely on the forecast to build a budget, manage overhead, and figure out long-term capital needs. 
• Operations Planning: The unit-sales numbers in your forecast are also important for operations planners. They will look at the production required to meet those sales and confirm that manufacturing capacity can accommodate them. They will want to know when sales are likely to rise or fall, so they can avoid excess inventory. A big increase in sales will also require operations managers to make changes in warehousing and distribution. Retailers may change the product mix at individual stores based on your sales forecast.
• Product Planning: The trends you foresee in sales will have big implications for product managers too. They will look at products that you forecast as top sellers for ideas about new products or product modifications they should introduce. A forecast of declining sales may signal it is time to discontinue or revamp a product.

Levels of Maturity in Sales Forecasting

Sales forecasts can be simply scribbled-down estimates, or they can be statistical masterpieces produced with the aid of the most sophisticated technology. The style you pursue relates in large part to your level of forecasting maturity (as well as the size and history of your business). 

Below is a description of the four levels of the sales forecasting maturity model:

• Level One: In the beginning stages of sales forecasting, the estimates are usually not very accurate and take a lot of time to produce. The forecasting process depends on reps’ best guesses, and sales managers spend a lot of time gathering these guesses by interviewing each rep. Then, they roll them up into a consolidated forecast. Inconsistent data collection and personal bias can skew the results. Sales managers use spreadsheets, which quickly become outdated, and the forecasts often reflect little more than intuition.
• Level Two: As your forecasting culture grows, you are probably still inputting data by hand, and the forecast is often inaccurate or outdated. But, a CRM solution is enabling your team to have a shared repository for contacts, sales activity, and deal status. Reps don’t see value in spending time contributing to the forecast, and quality is weak. Your CRM automatically aggregates those results, so you can start to examine trends and anomalies. But, your system is not very flexible, and forecasting remains unwieldy and resource intensive.
• Level Three: At this point, automation starts to offer radical improvements in sales forecasting. Solutions backed by artificial intelligence automatically bring together data from a multitude of sources, including email, CRM, marketing platforms, chat logs, and calendars. There is no more manual data entry, and sales managers gain increased visibility into the sales pipeline. KPIs become reliable and an important tool for monitoring performance.
• Level Four: Technology ensures sales that data is accurate and timely. AI and machine learning find patterns and correlations in your historical data, and predictive analytics offer robust forecasting. The forecasting model is continually refined. Forecast accuracy rises, and sales managers can focus more of their time on supporting reps and developing opportunities. These tools make it apparent when reps are sandbagging or being too optimistic, and accountability increases.

Advances in Sales Forecasting Methodologies

While sales forecasting has been around as long as private enterprise, the field continues to evolve, and researchers are looking at ways to improve sales forecasting methodologies. 

Indiana University Professor Douglas J. Dalrymple performed an influential study in 1987 that surveyed how businesses prepared sales forecasts. He found that qualitative and naive techniques predominated, but that early adopters were reducing errors by using computer analysis. At this time, PCs were starting to proliferate and come down in price. 

By 2008, Zhan-Li Sun and his researchers at the Institute of Textiles and Clothing at Hong Kong Polytechnic University were experimenting with an advanced AI-driven technique called extreme learning machine to see if they could improve forecasts for the volatile retail fashion industry by quantifying the influence of factors such as design on sales.  

Scholars F.L. Chen and T.Y. Ou at the National Tsing Hua University in Taiwan took this further with a 2011 study. The study documented sales forecasting advances when combining extreme learning-machine, so-called Taguchi statistical methods for manufacturing quality with novel analysis theories that work on variables with imperfect information.

Features to Look for in a Sales Forecasting Tool

Paper forecasts and Excel spreadsheets quickly become cumbersome. Sales forecasting capability is available in CRM software, sales analytics and automation platforms, and AI-driven sales technology. These capabilities often overlap among these applications.

Here are some of the features to look for when evaluating a sales forecasting tool:

• Integrations with other software, such as ERP, CRM, marketing suites, contact management, calendars, and more
• Automated collection of data and sales rep activity
• Real-time reporting
• Robust data security
• Analytics and automated scoring of deals
• Insights on most promising deals
• Scenario modeling
• Lead scoring
• Automated forecast roll-ups or summaries by category and team
• Dashboards and graphic displays of KPIs
• Benchmarking
• Customizable forecasting algorithms
• Forecast auditing and error analysis

Improve Sales Forecasting with Smartsheet for Sales

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

Discover why over 90% of Fortune 100 companies trust Smartsheet to get work done.

• Product overview
• All features
• Latest feature release
• App integrations

CAPABILITIES

• project icon Project management
• Project views
• Custom fields
• Status updates
• goal icon Goals and reporting
• Reporting dashboards
• workflow icon Workflows and automation
• portfolio icon Resource management
• Capacity planning
• Time tracking
• my-task icon Admin and security
• Admin console
• asana-intelligence icon Asana AI
• list icon Personal
• premium icon Starter
• briefcase icon Advanced
• Goal management
• Organizational planning
• Campaign management
• Creative production
• Content calendars
• Marketing strategic planning
• Resource planning
• Project intake
• Product launches
• Employee onboarding
• View all uses arrow-right icon
• Project plans
• Team goals & objectives
• Team continuity
• Meeting agenda
• View all templates arrow-right icon
• Work management resources Discover best practices, watch webinars, get insights
• Customer stories See how the world's best organizations drive work innovation with Asana
• Help Center Get lots of tips, tricks, and advice to get the most from Asana
• Asana Academy Sign up for interactive courses and webinars to learn Asana
• Developers Learn more about building apps on the Asana platform
• Community programs Connect with and learn from Asana customers around the world
• Events Find out about upcoming events near you
• Partners Learn more about our partner programs
• Asana for nonprofits Get more information on our nonprofit discount program, and apply.

Featured Reads

• Business strategy |
• Sales forecasting: How to create a sale ...

Sales forecasting: How to create a sales forecast template (with examples)

A strong sales team is the key to success for most companies. They say a good salesperson can sell sand at the beach, but whether you’re selling products in the Caribbean or Antarctica, it all comes down to strategy. When you’re unsure if your current strategy is working, a sales forecast can help.

What is a sales forecast?

A sales forecast predicts future sales revenue using past business data. Your sales forecast can predict a number of different things, including the number of new sales for an existing product, the new customers you’ll gain, or the memberships you’ll sell in a given time period. These forecasts are then used during project planning to determine how much you should allocate towards new products and services. 

Why is sales forecasting important?

Sales forecasting helps you keep a finger on your business’s pulse. It sets the ground rules for a variety of business operations, including your sales strategy and project planning. Once you calculate your sales projections, you can use the results to assess your business health, predict cash flow, and adjust your plans accordingly.

An effective sales forecasting plan:

Predicts demand: When you have an idea of how many units you may sell, you can get a head start on production.

Helps you make smart investments: If you have future goals of expanding your business with new locations or products, knowing when you’ll have the income to do so is important. 

Contributes to goal setting: Your sales forecast can help you set goals outside of investments as well, like outshining competitors or hiring new team members.

Guides spending: Your sales forecast may be the wake-up call you need to set a budget and use cost control to reduce expenses.

Improves the sales process: You can change your current sales process based on the sales projections you’re unhappy with.

Highlights financial problems: Your sales forecast template will open your eyes to problem areas you may not have noticed otherwise. 

Helps with resource management: Do you have the resources you need to fill orders if it’s an accurate sales forecast? Your sales forecast can guide how you allocate and manage resources to hit targets.

When you have an accurate prediction of your future sales, you can use your projections to adjust your current sales process. Leveraging inventory management software can help you implement these adjustments more effectively by providing up-to-date data on stock levels and supply chain performance.

Sales forecasting methods

Sales forecasting is an important part of strategic business planning because it enables sales managers and teams to predict future sales and make informed decisions. But why are there multiple sales forecasting methods? Simply put, businesses vary in size, industry, and market dynamics, so no single methodology suits all.

Choosing the right sales forecasting method is more of an art than a science. It involves:

Analyzing your business size and industry

Assessing the available data and tools

Understanding your sales cycle's complexity

A few telltale signs that you've picked the correct approach include:

Improved accuracy in sales target predictions

Enhanced understanding of market trends

Better alignment with your business goals

Opportunity stage forecasting

Opportunity stage forecasting is a dynamic approach ideal for businesses using CRM systems like Salesforce. It assesses the likelihood of sales closing based on the stages of the sales pipeline. This method is particularly beneficial for sales organizations with a clearly defined sales process.

For example, a software company might use this method to forecast sales by examining the number of prospects in each stage of their funnel, from initial contact to final negotiation.

Pipeline forecasting method

The pipeline forecasting method is similar to opportunity stage forecasting but focuses more on the volume and quality of leads at each pipeline stage. It's particularly useful for businesses that rely heavily on sales forecasting tools and dashboards for decision-making.

A real estate agency could use it by examining the number of properties listed, the stage of negotiations, and the number of closings forecasted in the pipeline.

Length of sales cycle forecasting

Small businesses often prefer the length of sales cycle forecasting. It's straightforward and involves analyzing the duration of past sales cycles to predict future ones. This method is effective for businesses with consistent sales cycle lengths.

A furniture manufacturer, for instance, might use this method by analyzing the average time taken from initial customer contact to closing a sale in the past year.

Intuitive forecasting

Intuitive forecasting relies on the expertise and intuition of sales managers and their teams. It's less about spreadsheets and more about market research and understanding customer behavior. This method is often used with other, more data-driven approaches.

A boutique fashion store, for example, might use this method, relying on the owner's deep understanding of fashion trends and customer preferences.

Historical forecasting

Historical forecasting uses past performance data to predict future sales. This method is advantageous for businesses with ample historical sales data. It's less effective for new markets or rapidly changing industries.

An established book retailer could use historical data from previous years, considering seasonal trends and past marketing campaigns, to forecast next quarter's sales.

Multivariable analysis forecasting

Multivariable analysis forecasting is a more sophisticated method that's ideal for larger sales organizations. It analyzes factors like market trends, economic conditions, and marketing efforts to provide a holistic view of potential sales outcomes.

An automotive company, for example, could analyze factors like economic conditions, competitor activity, and past sales data to forecast future car sales.

How to calculate sales forecast

Sales forecasts determine how much you expect to do in sales for a given time frame. For example, let’s say you expect to sell 100 units in Q1 of fiscal year 2024. To calculate sales forecasts, you’ll use past data to predict future trends. 

When you’re first creating a forecast, it’s important to establish benchmarks that determine how much you normally sell of any given product to how many people. Compare historical sales data against sales quotas—i.e., how much you sold vs. how much you expected to sell. This type of analysis can help you set a baseline for what you expect to achieve every week, month, quarter, and so on.

For many companies, this means establishing a formula. The exact inputs will vary based on your products or services, but generally, you can use the following:

Sales forecast = Number of products you expect to sell x The value of each product

For example, if you sell SaaS products, your sales forecast might look something like this: 

SaaS FY24 Sales forecast = Number of expected subscribers x Subscription price

Ultimately, the sales forecasting process is a guess—but it’s an educated one. You’ll use the information you already have to create a data-driven forecasting model. How accurate your forecast is depends on your sales team. The sales team uses facts such as their prospects, current market conditions, and their sales pipeline. But they will also use their experience in the field to decide on final numbers for what they think will sell. Because of this, sales leaders are more likely to have better forecasting accuracy than new members of the sales team.

Sales forecast vs. sales goal

Your sales forecast is based on historical data and current market conditions. While you always hope your sales goals are attainable—and you can use data to estimate what your team is capable of—your goals might not line up directly with your forecast. This can be for a number of reasons, including wanting to create stretch goals that push your sales team beyond what they’ve done in the past or big, pie-in-the-sky goals that boost investor confidence.

How to create a sales forecast

There are different sales forecasting methods, and some are simpler than others. With the steps below, you’ll have a basic understanding of how to create a sales forecast template that you can customize to the method of your choice. 

1. Track your business data

Without details from your past sales, you won’t have anything to base your predictions on. If you don’t have past sales data, you can begin tracking sales now to create a sales forecast in the future. The data you’ll need to track includes:

Number of units sold per month

Revenue of each product by month

Number of units returned or canceled (so you can get an accurate sales calculation)

Other items you can track to make your predictions more accurate include:

Growth percentage

Number of sales representatives

Average sales cycle length

There are different ways to use these data points when forecasting sales. If you want to calculate your sales run rate, which is your projected revenue for the next year, use your revenue from the past month and multiply it by 12. Then, adjust this number based on other relevant data points, like seasonality.

Tip: The best way to track historical data is to use customer relationship management (CRM) software. When you have a CRM strategy in place, you can easily pull data into your sales forecast template and make quick projections.

2. Set your metrics

Before you perform the calculations in your sales forecast template, you need to decide what you’re measuring. The basic questions you should ask are:

What is the product or service you’re selling and forecasting for? Answering this question helps you decide what exactly you’re evaluating. For example, you can investigate future trends for a long-standing product to decide whether it’s worth continuing, or you can predict future sales for a new product. 

How far in the future do you want to make projections? You can decide to make projections for as little as six months or as much as five years in the future. The complexity of your sales forecast is up to you.

How much will you sell each product for, and how do you measure your products? Set your product’s metrics, whether they be units, hours, memberships, or something else. That way, you can calculate revenue on a price-per-unit basis.

How long is your sales cycle? Your sales cycle—also called a sales funnel—is how long it takes for you to make the average sale from beginning to end. Sales cycles are often monthly, quarterly, or yearly. Depending on the product you’re selling, your sales cycle may be unique. Steps in the sales cycle typically include:

Lead generation

Lead qualification

Initial contact

Making an offer

Negotiation

Closing the deal

Tip: You can still project customer growth versus revenue even if your company is in its early phases. If you don’t have enough historical data to use for your sales forecast template, you can use data from a company similar to yours in the market. 

3. Choose a forecasting method

While there are many forecasting methods to choose from, we’ll concentrate on two straightforward approaches to provide a clear understanding of how sales forecasting can be implemented efficiently. The top-down method starts with the total size of the market and works down, while the bottom-up method starts with your business and expands out.

Top-down method: To use the top-down method, start with the total size of the market—or total addressable market (TAM). Then, estimate how much of the market you think your business can capture. For example, if you’re in a large, oversaturated market, you may only capture 3% of the TAM. If the total addressable market is $1 billion, your projected annual sales would be $30 million. 

Bottom-up method: With the bottom-up method, you’ll estimate the total units your company will sell in a sales cycle, then multiply that number by your average cost per unit. You can expand out by adding other variables, like the number of sales reps, department expenses, or website views. The bottom-up forecasting method uses company data to project more specific results. 

You’ll need to choose one method to fill in your sales forecast template, but you can also try both methods to compare results.

Tip: The best forecasting method for you may depend on what type of business you’re running. If your company experiences little fluctuation in revenue, then the top-down forecasting method should work well. The top-down model can also work for new businesses that have little business data to work with. Bottom-up forecasting may be better for seasonal businesses or startups looking to make future budget and staffing decisions.

4. Calculate your sales forecast

You’ve already learned a basic way to calculate revenue using the top-down method. Below, you’ll see another way to estimate your projected sales revenue on an annual scale.

Divide your sales revenue for the year so far by the number of months so far to calculate your average monthly sales rate.

Multiply your average monthly sales rate by the number of months left in the year to calculate your projected sales revenue for the rest of the year.

Add your total sales revenue so far to your projected sales revenue for the rest of the year to calculate your annual sales forecast.

A more generalized way to estimate your future sales revenue for the year is to multiply your total sales revenue from the previous year.

Example: Let’s say your company sells a software application for $300 per unit and you sold 500 units from January to March. Your sales revenue so far is $150,000 ($300 per unit x 500 units sold). You’re three months into the calendar year, so your average monthly sales rate is $50,000 ($150,000 / 3 months). That means your projected sales revenue for the rest of the year is $450,000 ($50,000 x 9 months).

5. Adjust for external factors

A sales forecast predicts future revenue by making assumptions about your growth rate based on past success. But your past success is only one component of your growth rate. There are external factors outside of your control that can affect sales growth—and you should consider them if you want to make accurate projections. 

Some external factors you can adjust your calculations around include:

Inflation rate: Inflation is how much prices increase over a specific time period, and it usually fluctuates based on a country’s overall economic state. You can take your annual sales forecast and factor in inflation rate to ensure you’re not projecting a higher or lower number of sales than the economy will permit.

The competition: Is your market becoming more competitive as time goes on? For example, are you selling software during a tech boom? If so, assess whether your market share will shrink because of rising competition in the coming year(s).

Market changes: The market can shift as people change their behavior. Your audience may spend an average of six hours per day on their phones in one year. In the next year, mental health awareness may cause phone usage to drop. These changes are hard to predict, so you must stay on top of market news.

Industry changes: Industry changes happen when new products and technologies come on the market and make other products obsolete. One instance of this is the invention of AI technology.

Legislation: Although not as common, changes in legislation can affect the way companies sell their products. For example, vaping was a multi-million dollar industry until laws banned the sale of vape products to people under the age of 21. 

Seasonality: Many industries experience seasonality based on how human behavior and human needs change with the seasons. For example, people spend more time inside during the winter, so they may be on their computers more. Retail stores may also experience a jump in sales around Christmas time.

Tip: You can create a comprehensive sales plan to set goals for team members. Aside from revenue targets and training milestones, consider assigning each of these external factors to your team members so they can keep track of essential information. That way, you’ll have your bases covered on anything that may affect future sales growth. 

Sales forecast template

Below you’ll see an example of a software company’s six-month sales forecast template for two products. Product one is a software application, and product two is a software accessory. 

In this sales forecast template, the company used past sales data to fill in each month. They projected their sales would increase by 10% each month because of a 5% increase in inflation and because they gained 5% more of the market. They kept their price per unit the same as the previous year.

Putting both products in the same chart can help the company see that their lower-cost product—the software accessory—brings in more revenue than their higher-cost product. The company can then use this insight to create more low-cost products in the future.

Sales forecast examples

Sales forecasting is not a one-size-fits-all process. It varies significantly across industries and business sizes. Understanding this through practical examples can help businesses identify the most suitable forecasting method for their unique needs.

Sales forecasting example 1: E-commerce

In the e-commerce sector, where trends can shift rapidly, intuitive forecasting is often useful for making quick, informed decisions.

Scenario: An e-commerce retailer specializing in fashion accessories is planning for the upcoming festive season.

Trend analysis phase: The team spends the first week analyzing customer feedback and current fashion trends on social media, using intuitive forecasting to predict which products will be popular.

Inventory planning phase: Based on these insights, the next three weeks are dedicated to selecting and ordering inventory, focusing on products predicted to be in high demand.

Sales monitoring and adjustment: As the holiday season approaches, the team closely monitors early sales data, ready to adjust their inventory and marketing strategies based on real-time sales performance.

This approach allows the e-commerce retailer to stay agile , adapting quickly to market trends and customer preferences.

Sales forecasting example 2: Software development

For a software development company, especially one working with B2B clients, opportunity stage forecasting can help predict sales and manage the sales pipeline effectively.

Scenario: A software development company is launching a new project management tool.

Lead generation and qualification phase: In the initial month, the sales team focuses on generating leads, qualifying them, and categorizing potential clients based on their progress through the sales pipeline.

Proposal and negotiation phase: For the next two months, the team works on creating tailored proposals for high-potential leads and enters negotiation stages, using opportunity stage forecasting to predict the likelihood of deal closures.

Closure and review: In the final phase, the team aims to close deals, review the accuracy of their initial forecasts, and refine their approach based on the outcomes.

Opportunity stage forecasting enables the software company to efficiently manage its sales pipeline , focusing resources on the most promising leads and improving their chances of successful deal closures.

Pair your sales forecast with a strong sales process

A sales forecast is only one part of the larger sales picture. As your team members acquire leads and close deals, you can track them through the sales pipeline. A solid sales plan is the foundation of future success.  

Related resources

15 creative elevator pitch examples for every scenario

How Asana streamlines strategic planning with work management

How to create a CRM strategy: 6 steps (with examples)

What is management by objectives (MBO)?

Sales Forecasting 101: The Ultimate Guide To Sales Forecasting

The ultimate guide to sales forecasting: sales forecasting 101 for your sales team.

Sales forecasting is a crucial component of any successful sales strategy. This article serves as the ultimate guide to sales forecasting, offering insights into the essential processes, tools, and methodologies needed to create accurate sales forecasts. Whether you're a sales manager or a sales rep, understanding and implementing effective sales forecasting can significantly impact your sales performance and future sales revenue.

Article Outline

What is a sales forecast, why is accurate sales forecasting important, sales forecasting 101: getting started with basics, the sales forecasting process: steps to follow, common sales forecasting methods and techniques, tools and software for sales forecasting, challenges in sales forecasting and how to overcome them, how sales forecasting impacts your sales strategy, tips for improving sales forecast accuracy, the role of sales data in forecasting.

A sales forecast is a prediction of future sales revenue that uses historical sales data, current sales trends, and market conditions. It helps sales teams and sales managers set realistic sales goals and plan their strategies effectively.

Sales forecasting is an educated guess about future sales that can guide your sales team in making informed decisions. Accurate sales forecasts can help businesses allocate resources efficiently, manage inventory, and set achievable targets.

Here is a video to get a different view on sales forecasting:

Accurate sales forecasting is crucial for several reasons. It enables businesses to predict future sales revenue accurately, helping them make informed decisions about budgeting, staffing, and production. Accurate sales forecasts also help in setting realistic sales goals and managing the sales pipeline effectively.

Without accurate sales forecasting, businesses risk overestimating or underestimating their future sales, leading to potential financial losses and missed opportunities. Inaccurate sales forecasts can result in poor resource allocation, excess inventory, and unmet sales quotas.

Sales forecasting 101 involves understanding the basics of sales forecasting and implementing fundamental techniques to create accurate forecasts. Begin by collecting past sales data, analyzing sales trends, and identifying factors that impact your sales. Use this information to create a sales forecast that reflects your business's unique sales cycle and market conditions.

Sales managers should involve their sales team in the forecasting process to ensure that the forecast reflects the sales reps' insights and experiences. This collaborative approach can lead to more accurate sales forecasts and better alignment with the sales team's goals.

The sales forecasting process involves several key steps:

• Data Collection : Gather historical sales data, market trends, and other relevant information.
• Analysis : Analyze the collected data to identify patterns and trends.
• Forecasting Method Selection : Choose a forecasting method that suits your business needs.
• Forecast Creation : Use the selected method to create a sales forecast.
• Review and Adjust : Regularly review and adjust the forecast based on actual sales performance and new data.

By following these steps, sales teams can create accurate sales forecasts that guide their sales strategies and help them achieve their sales goals.

Several sales forecasting methods can be used to predict future sales. Some common techniques include:

• Historical Sales Data Analysis : Using past sales data to predict future sales.
• Market Research : Conducting market research to understand trends and customer behavior.
• Sales Rep Estimates : Gathering estimates from sales reps based on their experience and knowledge.
• Statistical Models : Using statistical models and algorithms to forecast sales.

Here is a Comparison of Sales Forecasting Methods:

Each method has its strengths and weaknesses, and businesses may use a combination of methods to create the most accurate sales forecast.

Various sales forecasting tools and software can help businesses create accurate sales forecasts. These tools often include features like data analysis, trend identification, and predictive modeling. Some popular sales forecasting software includes Salesforce, HubSpot, and Zoho CRM.

For more advanced tools, SalesMind AI offers LinkedIn Prospecting Automation , which integrates sales analytics to enhance forecasting accuracy. These tools can streamline the forecasting process, making it easier for sales teams to create and manage their forecasts. By using advanced analytics and machine learning algorithms, these tools can provide more accurate and reliable sales forecasts.

Sales forecasting comes with several challenges, such as data accuracy, market volatility, and changing customer behavior. To overcome these challenges, businesses should:

• Ensure Data Accuracy : Regularly update and clean sales data to maintain accuracy.
• Monitor Market Trends : Stay informed about market trends and adjust forecasts accordingly.
• Involve the Sales Team : Engage the sales team in the forecasting process to gain valuable insights and improve forecast accuracy.

By addressing these challenges, businesses can improve their sales forecasting accuracy and make more informed decisions.

Sales forecasting plays a crucial role in shaping your sales strategy. Accurate sales forecasts help sales leaders set realistic sales goals, allocate resources efficiently, and manage the sales pipeline effectively. By understanding future sales trends, businesses can plan their sales activities and marketing campaigns to maximize revenue.

Sales forecasting also helps in identifying potential risks and opportunities, allowing sales teams to take proactive measures to address them. This can lead to improved sales performance and better alignment with overall business objectives.

To improve sales forecast accuracy, businesses can implement the following tips:

• Use Reliable Data Sources : Ensure that the data used for forecasting is accurate and up-to-date.
• Regularly Review and Adjust Forecasts : Continuously monitor sales performance and adjust forecasts as needed.
• Involve Multiple Stakeholders : Engage various stakeholders, including sales reps and sales managers, in the forecasting process to gain diverse perspectives.

By following these tips, businesses can create more accurate sales forecasts that guide their sales strategies and help them achieve their goals.

Sales data plays a vital role in sales forecasting. Historical sales data provides the foundation for predicting future sales trends and setting realistic sales goals. By analyzing past sales data, businesses can identify patterns and trends that inform their sales forecasts.

Sales data also helps in tracking the performance of sales reps and understanding the effectiveness of different sales strategies. By leveraging sales data, businesses can make more informed decisions and improve their sales performance.

Enhanced Forecasting Techniques for Better Sales Performance

Improving your forecasting techniques is essential for building an accurate sales forecast. Utilizing sales analytics and understanding the length of the sales cycle can help in creating a sales forecast that aligns with your sales targets. Employing multiple forecasting techniques and tools allows sales organizations to better forecast sales and achieve their goals.

Sales forecasting allows businesses to anticipate market changes and adjust their strategies accordingly. Accurate forecasting helps in managing the current sales pipeline and predicting the status of the current sales, ensuring that sales reps are informed and can communicate effectively with prospects.

Factors That Impact Sales Forecasting

Several factors can impact sales forecasting, including market conditions, economic trends, and the performance of individual sales reps. Understanding these factors is crucial for achieving sales forecasting accuracy. Sales managers should track the age of the sales opportunity and the length of the sales cycle to make more precise forecasts.

Sales forecasting is different from other business processes because it involves making an educated guess about future sales. By considering various factors that impact sales forecasting, businesses can make more accurate predictions and improve their overall sales performance.

Understanding Sales Forecasting Challenges

Sales forecasting challenges are common in many sales organizations. These challenges can arise from fluctuating market conditions, data inconsistencies, and the unpredictable nature of customer behavior. Addressing these challenges requires a strategic approach, including the use of sales analytics for accurate forecasting and leveraging multiple forecasting techniques.

Creating a sales forecast that is both realistic and flexible can help mitigate these challenges. Sales forecasting allows businesses to prepare for various scenarios, ensuring they remain resilient in the face of uncertainties. By using two or more sales forecasting methodologies, companies can enhance the reliability of their forecasts and better navigate sales forecasting challenges.

Impact of Sales Forecasting on Sales Performance

Sales forecasting has a significant impact on sales performance as a company. By accurately forecasting future sales revenue, businesses can set achievable sales targets and track progress against these goals. This helps in maintaining a clear focus and aligning the efforts of the sales team towards common objectives.

Using sales forecasting to monitor the status of the current sales pipeline can provide valuable insights into the effectiveness of different sales strategies. This allows sales managers to make data-driven decisions and adjust their approach to maximize sales performance.

To further enhance your sales forecasting capabilities, consider signing up for SalesMind AI's advanced tools. Register here to get started.

Summary of Key Takeaways

• Understanding Sales Forecasting : Sales forecasting is the process of predicting future sales revenue using historical data, market trends, and other factors.
• Importance of Accuracy : Accurate sales forecasting is crucial for effective resource allocation, inventory management, and goal setting.
• Steps in the Forecasting Process : The sales forecasting process involves data collection, analysis, method selection, forecast creation, and regular review.
• Methods and Tools : Common forecasting methods include historical data analysis, market research, and statistical models. Popular forecasting tools include Salesforce, HubSpot, and Zoho CRM.
• Overcoming Challenges : Address challenges like data accuracy and market volatility by involving the sales team and staying informed about market trends.
• Impact on Sales Strategy : Sales forecasting helps set realistic goals, allocate resources efficiently, and manage the sales pipeline effectively.
• Improving Accuracy : Use reliable data, regularly review forecasts, and involve multiple stakeholders to improve forecast accuracy.
• Role of Sales Data : Sales data is essential for identifying trends, tracking performance, and making informed decisions.
• Enhanced Forecasting Techniques : Utilize sales analytics and multiple forecasting techniques to improve sales forecast accuracy.
• Impact of External Factors : Understand and monitor external factors that can impact sales forecasting for better predictions.

By understanding and implementing these key aspects of sales forecasting, businesses can enhance their sales strategies and achieve their sales goals effectively. This ultimate guide to sales forecasting provides a comprehensive overview of the tools, techniques, and processes needed to create accurate and reliable sales forecasts. For more resources, visit the SalesMind AI home page .

Julien Gadea specializes in AI prospecting solutions for business growth. Empowering businesses to connect with their audience with SalesMind AI tools.

Julien Gadea

Subscribe for the latest on artificial intelligence in sales.

Similar blog posts

Transforming Business with Salesforce Einstein AI Solutions: Harnessing the Power of Artificial Intelligence

AI Cold Email Generator: Your Magical AI Email Template Tool

Top 10 Best Sales Training Software for 2024: Transform Your Team into Superstars

Ultimate Guide: Top Sales Enablement Tools in 2024

Maximizing Profitability: Mastering AI Sales Forecasting for 2024

Ultimate Guide to Using the Best AI for Sales Prospecting: Top Tools and Strategies to Maximize Your Pipeline

Let's chat.

How to Create a Sales Forecast

11 min. read

Updated October 27, 2023

Business owners are often afraid to forecast sales. But, you shouldn’t be. Because you can successfully forecast your own business’s sales.

You don’t have to be an MBA or CPA. It’s not about some magic right answer that you don’t know. It’s not about training you don’t have. It doesn’t take spreadsheet modeling (much less econometric modeling) to estimate units and price per unit for future sales. You just have to know your own business. 

Forecasting isn’t about seeing into the future

Sales forecasting is much easier than you think and much more useful than you imagine.

I was a vice president of a market research firm for several years, doing expensive forecasts, and I saw many times that there’s nothing better than the educated guess of somebody who knows the business well. All those sophisticated techniques depend on data from the past — and the past, by itself, isn’t the best predictor of the future. You are.

It’s not about guessing the future correctly. We’re human; we don’t do that well. Instead, it’s about setting down assumptions, expectations, drivers, tracking, and management. It’s about doing your job, not having precognitive powers. 

• Successful forecasting is driven by regular reviews

What really matters is that you review and revise your forecast regularly. Spending should be tied to sales, so the forecast helps you budget and manage. You measure the value of a sales forecast like you do anything in business, by its measurable business results.

That also means you should not back off from forecasting because you have a new product, or new business, without past data. Lay out the sales drivers and interdependencies, to connect the dots, so that as you review plan-versus-actual results every month, you can easily make course corrections.

If you think sales forecasting is hard, try running a business without a forecast. That’s much harder.

Your sales forecast is also the backbone of your business plan . People measure a business and its growth by sales, and your sales forecast sets the standard for  expenses , profits, and growth. The sales forecast is almost always going to be the first set of numbers you’ll track for plan versus actual use, even if you do no other numbers.

If nothing else, just forecast your sales, track plan-versus-actual results, and make corrections — that process alone, just the sales forecast and tracking is in itself already business planning. To get started on building your forecast follow these steps.

And if you run a subscription-based business, we have a guide dedicated to building a sales forecast for that business model.

• Step 1: Set up your lines of sales

Most forecasts show several distinct lines of sales. Ideally, your sales lines match your accounting, but not necessarily in the same level of detail.   

For example, a restaurant ought not to forecast sales for each item on the menu. Instead, it forecasts breakfasts, lunches, dinners, and drinks, summarized. And a bookstore ought not to forecast sales by book, and not even by topic or author, but rather by lines of sales such as hardcover, softcover, magazines, and maybe categories (such as fiction, non-fiction, travel, etc.) if that works.

Always try to set your streams to match your accounting, so you can look at the difference between the forecast and actual sales later. This is excellent for real business planning. It makes the heart of the process, the regular review, and revision, much easier. The point is better management.

For instance, in a bicycle retail store business plan, the owner works with five lines of sales, as shown in the illustration here.  

In this sample case, the revenue includes new bikes, repair, clothing, accessories, and a service contract. The bookkeeping for this retail store tracks sales in those same five categories.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• Step 2: Forecast line by line

There are many ways to forecast a line of sales.

The method for each row depends on the business model

Among the main methods are:.

• Unit sales : My personal favorite. Sales = units times price. You set an average price and forecast the units. And of course, you can change projected pricing over time. This is my favorite for most businesses because it gives you two factors to act on with course corrections: unit sales, or price.
• Service units : Even though services don’t sell physical units, most sell billable units, such as billable hours for lawyers and accountants, or trips for transportations services, engagements for consultants, and so forth.
• Recurring charges : Subscriptions. For each month or year, it has to forecast new signups, existing monthly charges, and cancellations. Estimates depend on both new signups and cancellations, which is often called “churn.”
• Revenue only : For those who prefer to forecast revenue by the stream as just the money, without the extra information of breaking it into units and prices.

Most sales forecast rows are simple math

For a business plan, I recommend you make your sales forecast a detailed look at the next 12 months and then broadly cover two years after that. Here’s how to approach each method of line-by-line forecasting.

Start with units if you can

For unit sales, start by forecasting units month by month, as shown here below for the new bike’s line of sales in the bicycle shop plan:

I recommend looking at the visual as you forecast the units because most of us can see trends easier when we look at the line, as shown in the illustration, rather than just the numbers. You can also see the numbers in the forecast near the bottom. The first year, fiscal 2021 in this forecast, is the sum of those months.

Estimate price assumptions

With a simple revenue-only assumption, you do one row of units as shown in the above illustration, and you are done. The units are dollars, or whatever other currency you are using in your forecast. In this example, the new bicycle product will be sold for an average of $550.00. 

That’s a simplifying assumption, taking the average price, not the detailed price for each brand or line. Garrett, the shop owner, uses his past results to determine his actual average price for the most recent year. Then he rounds that estimate and adds his own judgment and educated guess on how that will change. 

Multiply price times units

Multiplying units times the revenue per unit generates the sales forecast for this row. So for example the $18,150 shown for October of 2020 is the product of 33 units times $550 each. And the $21,450 shown for the next month is the product of 39 units times $550 each. 

Subscription models are more complicated

Lately, a lot of businesses offer their buyers subscriptions, such as monthly packages, traditional or online newspapers, software, and even streaming services. All of these give a business recurring revenues, which is a big advantage. 

For subscriptions, you normally estimate new subscriptions per month and canceled subscriptions per month, and leave a calculation for the actual subscriptions charged. That’s a more complicated method, which demands more details. 

For that, you can refer to detailed discussions on subscription forecasting in How to Forecast Sales for a Subscription Business .

• But how do you know what numbers to put into your sales forecast?

The math may be simple, yes, but this is predicting the future, and humans don’t do that well. So, don’t try to guess the future accurately for months in advance.

Instead, aim for making clear assumptions and understanding what drives your sales, such as web traffic and conversions, in one example, or the direct sales pipeline and leads, in another. Review results every month, and revise your forecast. Your educated guesses become more accurate over time.

Experience in the field is a huge advantage

In a normal ongoing business, the business owner has ample experience with past sales. They may not know accounting or technical forecasting, but they know their business. They are aware of changes in the market, their own business’s promotions, and other factors that business owners should know. They are comfortable making educated guesses.

If you don’t personally have the experience, try to find information and make guesses based on the experience of an employee,  your mentor , or others you’ve spoken within your field.

Use past results as a guide

Use results from the recent past if your business has them. Start a forecast by putting last year’s numbers into next year’s forecast, and then focus on what might be different this year from next.

Do you have new opportunities that will make sales grow? New marketing activities, promotions? Then increase the forecast. New competition, and new problems? Nobody wants to forecast decreasing sales, but if that’s likely, you need to deal with it by cutting costs or changing your focus.

Look for drivers

To forecast sales for a new restaurant, first, draw a map of tables and chairs and then estimate how many meals per mealtime at capacity, and in the beginning. It’s not a random number; it’s a matter of how many people come in.

To forecast sales for a new mobile app, you might get data from the Apple and Android mobile app stores about average downloads for different apps. A good web search might also reveal some anecdotal evidence, blog posts, and news stories, about the ramp-up of existing apps that were successful.

Get those numbers and think about how your case might be different. Maybe you drive downloads with a website, so you can predict traffic from past experience and then assume a percentage of web visitors who will download the app.

• Estimate direct costs

Direct costs are also called the cost of goods sold (COGS) and per-unit costs. Direct costs are important because they help calculate gross margin, which is used as a basis for comparison in financial benchmarks, and are an instant measure (sales less direct costs) of your underlying profitability.

For example, I know from benchmarks that an average sporting goods store makes a 34 percent gross margin. That means that they spend $66 on average to buy the goods they sell for $100.

Not all businesses have direct costs. Service businesses supposedly don’t have direct costs, so they have a gross margin of 100 percent. That may be true for some professionals like accountants and lawyers, but a lot of services do have direct costs. For example, taxis have gasoline and maintenance. So do airlines.

A normal sales forecast includes units, price per unit, sales, direct cost per unit, and direct costs. The math is simple, with the direct costs per unit related to total direct costs the same way price per unit relates to total sales.

Multiply the units projected for any time period by the unit direct costs, and that gives you total direct costs. And here too, assume this view is just a cut-out, it flows to the right. In this example, Garrett the shop owner projected the direct costs of new bikes based on the assumption of 49 percent of sales.

Given the unit forecast estimate, the calculation of units times direct costs produces the forecast shown in the illustration below for direct costs for that product. So therefore the projected direct costs for new bikes in October is $8,894, which is 49% of the projected sales for that month, $18,150.

• Never forecast in a vacuum

Never think of your sales forecast in a vacuum. It flows from the strategic action plans with their assumptions,  milestones , and metrics. Your marketing milestones affect your sales. Your business offering milestones affect your sales.

When you change milestones—and you will, because all business plans change—you should change your sales forecast to match.

• Timing matters

Your sales are supposed to refer to when the ownership changes hands (for products) or when the service is performed (for services). It isn’t a sale when it’s ordered, or promised, or even when it’s contracted.

With proper  accrual accounting , it is a sale even if it hasn’t been paid for. With so-called cash-based accounting, by the way, it isn’t a sale until it’s paid for. Accrual is better because it gives you a more accurate picture, unless you’re very small and do all your business, both buying and selling, with cash only.

I know that seems simple, but it’s surprising how many people decide to do something different. The penalty for doing things differently is that then you don’t match the standard, and the bankers, analysts, and investors can’t tell what you meant.

This goes for direct costs, too. The direct costs in your monthly  profit and loss statement  are supposed to be just the costs associated with that month’s sales. Please notice how, in the examples above, the direct costs for the sample bicycle store are linked to the actual unit sales.

• Live with your assumptions

Sales forecasting is not about accurately guessing the future. It’s about laying out your assumptions so you can manage changes effectively as sales and direct costs come out different from what you expected. Use this to adjust your sales forecast and improve your business by making course corrections to deal with what is working and what isn’t.

I believe that even if you do nothing else, by the time you use a sales forecast and review plan versus actual results every month, you are already managing with a business plan . You can’t review actual results without looking at what happened, why, and what to do next.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• Forecasting isn’t about seeing into the future

Related Articles

8 Min. Read

How to Forecast Personnel Costs in 3 Steps

3 Min. Read

What Is a Break-Even Analysis?

9 Min. Read

How to Create a Cash Flow Forecast

4 Min. Read

How to Create an Expense Budget

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

Strategic Sales Forecasting: Examples and Templates

December 22, 2023

Ariel Gottfeld

Sales forecasting isn’t just for large enterprises: every business can benefit from these forecasts. If you think that your small company or startup can’t benefit from forecasting, we’re going to show you the importance of running your own forecasts.

Introduction to Sales Forecasting

What is a sales forecast?

It's a prediction of how many sales you’ll make over a pre-defined period. For example, public companies often create sales forecasts for the coming quarter and year. Smaller businesses can benefit from having short-term forecasts that may be as short as one week.

They'll be able to better prepare for the sales ahead, whether that means:

• Hiring people during a sales rush
• Laying people off when weak sales are projected

A consistent sales forecast definition would be: a process to estimate the sale of a product or service over a specified period of time .

Benefits of Accurate Sales Forecasting

Accurate sales forecasting is challenging for many businesses, but when your forecasting method is accurate – or close to it – you'll benefit in many ways:

• Increase your chance of hitting sales targets. Reaching sales targets is easier when you have forecasts in place. One survey found that 97% of companies hit their goals when they had forecasts. Why? No data was provided. However, it can be hypothesized that the sales team worked harder to hit the forecasted figures.
• Aids in decision-making. Data-backed decisions are often sound and better help a business grow. Sales forecasts allow leaders to make pertinent decisions based on the potential sales of the company. Funding can be sought for slow sales periods or workers hired if there’s an influx of sales.
• Strategic planning. Scenarios and strategic planning can be put in place when you run sales forecasts. You'll have the opportunity to correct potential sales slumps and find ways to better manage cash flow.
• Identify industry trends. Is one product or service no longer selling well? If so, you can spot this trend and perhaps funnel more money into advertising or discontinue the item if the market appetite has shifted away from it.

Utilizing forecasting means being better prepared for the future. It's unlikely that your forecast will be 100% accurate, but it can help you develop contingency plans for periods of growing or declining sales.

Common Methods for Sales Forecasting

Forecasting sales can be done using multiple methods, but many companies are using software to run the calculations. However, some of the most common methods when creating forecasts are:

• Trend analysis: Business sales go through trends. Sometimes called historical analysis, this form of forecasting will analyze all of your past sales to spot seasonal trends, such as sales rising in December and falling in February. Analysis can also include target market information and location.
• Regression analysis: Through regression analysis, a sales team utilizes past performance data to help predict what would happen between two variables, such as one marketing method and its ability to generate sales.
• Time series analysis: A common form of sales forecasting involves time series analysis. Using this method, data is analyzed at different intervals and tracked over time to learn how it changes.
• Causal analysis: This form of forecasting involves analyzing the current market, understanding influences that may impact sales and adding variables that can change the course of sales during the reporting period.

Utilizing consistent forecasting models will allow you to track the accuracy of forecasts. By integrating a sales forecasting solution , businesses can streamline their forecasting processes, ensuring data consistency and enhancing predictive accuracy.

Real-life Sales Forecasting Examples

Below are examples using multiple sales forecasting methods:

Creating an Effective Sales Forecast Template

Creating a sales forecast template can help simplify the forecasting process. Spreadsheets and software tools are available that can help you create templates.

First, frame out the template by outlining:

• What you’re forecasting
• The time periods you’re covering
• Your most important KPIs

Looking at a sales forecasting example can help you with creating your own template.

Best Practices for Strategic Sales Forecasting

When it comes to sales forecasting, it’s important to follow the best practices to ensure they’re reliable and accurate.

Use Historical Data

If you have an established business, use historical data to create your forecasts. If you have a new business or haven’t implemented analytics or other forms of data tracking, now is the time to start.

Understanding your past will help you understand where you’re headed.

Historical data isn't always an accurate prediction of the future, but it can serve as a solid foundation for your forecasts.

Use a Simple Model

It's tempting to use a variety of sales forecasting models, but try to resist this temptation. Instead, start with a simple model and improve it over time.

The fewer variables you have to keep track of, the better. Why? Because it will be easier to:

• Achieve your sales goals
• Secure approval from leadership on your sales forecast

If you start with a simple model, you can build on it slowly over time.

Don’t Forget Seasonality

If your business has high and low seasons, don’t forget to incorporate that into your forecasting model.

If your forecast is linear, you will lose some accuracy and reliability due to seasonality or other factors.

Consider Market Trends and Your Competitors

Sales are affected by more than internal factors, like your sales team. There are many external factors and variables that are market-related that will affect your sales and, ultimately, your forecasts.

Let’s say that you have two products – one that is new and trendy and another that is a steady staple in your lineup. These two products should have separate segments because their growth trajectories would also be different.

Competition is another consideration. If you have a competitor that has similar offerings and decides to lower their price, this will undoubtedly affect your sales.

Keeping a pulse on the market is important, as you can take these factors into account and create more accurate sales forecasts.

Consider “What If” Scenarios

Creating “what if” scenarios will allow you to look at your business from different perspectives and gain new insights.

These scenarios can help you with building sales forecasts.

Tools and Software for Sales Forecasting

Tools and software can help simplify and streamline sales forecast modeling . These tools connect with your accounting software and use that data to create forecasts automatically.

One big advantage of using tools and software is that they reduce the risk of error because all of the data comes directly from your bank account.

A wide range of solutions are available to help make sales forecasting as simple and easy as possible.

Sales forecasting plays an important role in running a business. It helps you understand whether you will have the funds to carry out your plans, hire new staff or have the ability to expand your operations.

Tools and software can help automate the process and virtually eliminate the risk of error.

Related posts:

June 14, 2024

The Importance of Sales Forecasting: A Guide for Business Success

July 19, 2024

The Importance of Financial Projections for Nonprofit Organizations

August 23, 2024

How to Calculate Net Working Capital And Why You Should Do It?

You may be interested:

August 6, 2024

Best Ways to Prepare Your Business for a Recession and Double Your Money

June 10, 2024

Financial Reporting and Analysis: The Key to Corporate Success

June 26, 2024

Financial Literacy: Basics of Personal Finance and Budget Management

August 16, 2024

7 Best Strategies for Managing Cash Flow in a Crisis

August 9, 2024

What is a Rolling Forecast and How to Create It?

What is Sales Planning? How to Create a Sales Plan

Published: December 06, 2023

Sales planning is a fundamental component of sound selling. After all, you can‘t structure an effective sales effort if you don’t have, well, structure . Everyone — from the top to the bottom of a sales org — benefits from having solid, actionable, thoughtfully organized sales plans in place.

This kind of planning offers clarity and direction for your sales team — covering everything from the prospects you‘re trying to reach to the goals you’re trying to hit to the insight you're trying to deliver on.

But putting together one of these plans isn‘t always straightforward, so to help you out, I’ve compiled this detailed guide to sales planning — including expert-backed insight and examples — that will ensure your next sales plan is fundamentally sound and effective.

hbspt.cta._relativeUrls=true;hbspt.cta.load(53, 'b91f6ffc-9ab7-4b84-ba51-e70672d7796e', {"useNewLoader":"true","region":"na1"});

In this post, we'll cover:

What is a sales plan?

Sales planning process.

• What goes in a sales plan template?

How to Write a Sales Plan

Tips for creating an effective sales plan, sales plan examples, strategic sales plan examples.

A sales plan lays out your objectives, high-level tactics, target audience, and potential obstacles. It's like a traditional business plan but focuses specifically on your sales strategy. A business plan lays out your goals — a sales plan describes exactly how you'll make those happen.

Sales plans often include information about the business's target customers, revenue goals, team structure, and the strategies and resources necessary for achieving its targets.

Free Sales Plan Template

Outline your company's sales strategy in one simple, coherent sales plan.

• Target Market
• Prospecting Strategy

Download Free

All fields are required.

You're all set!

Click this link to access this resource at any time.

What are the goals of an effective sales plan?

And if (or more likely when ) those goals change over time, you need to regularly communicate those shifts and the strategic adjustments that come with them to your team.

Your sales strategy keeps your sales process productive — it offers the actionable steps your reps can take to deliver on your vision and realize the goals you set. So naturally, you need to communicate it effectively. A sales plan offers a solid resource for that.

For instance, your sales org might notice that your SDRs are posting lackluster cold call conversion rates. In turn, you might want to have them focus primarily on email outreach, or you could experiment with new sales messaging on calls.

Regardless of how you want to approach the situation, a thoughtfully structured sales plan will give both you and your reps a high-level perspective that would inform more cohesive, effective efforts across the team.

An effective sales org is a machine — one where each part has a specific function that serves a specific purpose that needs to be executed in a specific fashion. That's why everyone who comprises that org needs to have a clear understanding of how they specifically play into the company's broader sales strategy.

Outlining roles and responsibilities while sales planning lends itself to more efficient task delegation, improved collaboration, overlap reduction, and increased accountability. All of which amount to more streamlined, smooth, successful sales efforts.

Sales planning can set the framework for gauging how well your team is delivering on your sales strategy. It can inform the benchmarks and milestones reps can use to see how their performance stacks up against your goals and expectations.

It also gives sales leadership a holistic view of how well a sales org is functioning as a whole — giving them the necessary perspective to understand whether they have the right people and tools in place to be as successful as possible.

Sales planning isn‘t (and shouldn’t) be limited to the actual sales plan document it produces. If that document is going to have any substance or practical value, it needs to be the byproduct of a thorough, well-informed, high-level strategy.

When sales planning, you have some key steps you need to cover — including:

• Gather sales data and search for trends.
• Define your objectives.
• Determine metrics for success.
• Assess the current situation.
• Start sales forecasting.
• Identify gaps.
• Ideate new initiatives.
• Involve stakeholders.
• Outline action items.

When putting this list together, I consulted Zach Drollinger — Senior Director of Sales at edtech provider Coursedog — to ensure the examples detailed below are sound and accurate.

Step 1: Gather sales data and search for trends.

To plan for the present and future, your company needs to look to the past. What did sales look like during the previous year? What about the last five years? Using this information can help you identify trends in your industry. While it's not foolproof, it helps establish a foundation for your sales planning process.

For the sake of example, let‘s say that I’m a new sales director for an edtech company that sells curriculum planning software to higher education institutions. My vertical is community colleges, and my territory is the East Coast.

Once I assume this new role, I‘m going to want to gather as much context as possible about my vertical and how my company has approached it historically. I would pull information about how we’ve sold to this vertical.

How much new business have we closed within it in the past five years? How does that compare to how we perform with other kinds of institutions? Are we seeing significant churn from these customers?

I would also want to get context about the general needs, interests, and pain points of the kinds of institutions I‘m selling to. I’d look for insight into figures like degree velocity, staff retention, and enrollment.

Ultimately, I would get a comprehensive perspective on my sales process — a thorough understanding of where I stand and what my prospects are dealing with. That will ensure that I can deliver on the next step as effectively as possible.

Step 2: Define your objectives.

How do you know your business is doing well if you have no goals? As you can tell from its placement on this list, defining your goals and objectives is one of the first steps you should take in your sales planning process. Once you have them defined, you can move forward with executing them.

To extend the example from the previous step, I would leverage the context I gathered through the research I conducted about both my and my prospect's circumstances. I would start setting both broader goals and more granular operational objectives .

For instance, I might want to set a goal of increasing sales revenue from my vertical. From there, I would start putting together the kind of specific objectives that will facilitate that process — like connecting with administrators from at least 30 community colleges, booking demos with at least 10 schools, and successfully closing at least five institutions.

Obviously, those steps represent a streamlined (and unrealistically straightforward) sales process, but you get the idea — I would set a concrete goal, supplemented by SMART objectives , that will serve as a solid reference point for my org's efforts as the sales process progresses.

Step 3: Determine metrics for success.

Every business is different. One thing we can all agree on is that you need metrics for success. These metrics are key performance indicators (KPIs). What are you going to use to determine if your business is successful? KPIs differ based on your medium, but standard metrics are gross profit margins, return on investment (ROI), daily web traffic users, conversion rate, and more.

I kind of covered this step in the previous example, but it still warrants a bit more elaboration. The “M” in SMART goals (“measurable”) is there for a reason. You can‘t tell if your efforts were successful if you don’t know what “successful” actually means.

The edtech sales example I‘ve been running with revolves mostly around me assuming ownership of an existing vertical and getting more out of it. So it’s fair to assume that sales growth rate — the increase or decrease of sales revenue in a given period, typically expressed as a percentage — would be an effective way to gauge success.

I might want to structure my goals and objectives around a sales growth rate of 20% Y/Y within my vertical. I would make sure my org was familiar with that figure and offer some context about what it would take to reach it — namely, how many institutions we would need to close and retain.

Step 4: Assess the current situation.

How is your business fairing right now? This information is relevant to determining how your current situation holds up to the goals and objectives you set during step two. What are your roadblocks? What are your strengths? Create a list of the obstacles hindering your success. Identify the assets you can use as an advantage. These factors will guide you as you build your sales plan.

Continuing the edtech example, I would use the historical context I gathered and the objectives I set to frame how I look at my current circumstances. I might start by considering my goal of increasing revenue by 20% Y/Y. In that case, I would look at the company's retention figures — ideally, that would give me a sense of whether that needs to be a major area of focus.

I would also try to pin down trends in the colleges that we've already closed — are there any pain points we consistently sell on? I might take a closer look at how we demo to see if we might be glossing over key elements of our value proposition. Maybe, I would use conversation intelligence to get a better sense of how reps are handling their calls.

Ultimately, I would try to identify why we're performing the way we are, the inefficiencies that might be resulting from our current strategy, and how we can best set ourselves up to sell as effectively as possible.

Step 5: Start sales forecasting.

Sales forecasting is an in-depth report that predicts what a salesperson, team, or company will sell weekly, monthly, quarterly, or annually. While it is finicky, it can help your company make better decisions when hiring, budgeting, prospecting, and setting goals.

After the COVID-19 pandemic, economics has become less predictable. Claire Fenton , the owner of StrActGro — a professional training and coaching company — states, “Many economic forecasters won't predict beyond three months at a time.” This makes sales forecasting difficult. However, there are tools at your disposal to create accurate sales forecasts .

In our edtech example, I would approach this step by trying to estimate how my sales org is going to fare with the specific vertical we‘re pursuing in the time window we’ve allotted.

The method I decide to go with will depend on factors like how many concrete opportunities we have lined up — in addition to elements like the kind of historical data we have handy, how the reps working these deals tend to perform, and the degree of insight we have about our potential customers.

Let's say I consider those factors and decide to run something called a multivariable analysis. In that case, I could start by taking stock of the opportunities my reps have lined up. Then, I could look at the reps working those deals, their typical win rates, and the time they have to close — among other factors.

For instance, I might calculate that a rep working with a particularly large institution has a 50% chance of closing within the window we‘ve allotted. Using that insight, we could attribute 50% of the potential deal size to our forecast — we’d repeat that process with all of the opportunities in question and ideally get a solid sense of the revenue we can expect to generate in this window.

Step 6: Identify gaps.

When identifying gaps in your business, consider what your company needs now and what you might need in the future. First, identify the skills you feel your employees need to reach your goal. Second, evaluate the skills of your current employees. Once you have this information, you can train employees or hire new ones to fill the gaps.

Continuing the edtech example, let‘s say my forecast turned up results that weren’t in keeping with what we need to reach our goals. If that were the case, I would take a holistic look at our process, operations, and resources to pin down inefficiencies or areas for improvement.

In my search, I find that our sales content and marketing collateral are dated — with case studies that don‘t cover our product’s newest and most relevant features. I also might see that our reps don‘t seem to have too much trouble booking demos, but the demos themselves aren’t converting due to a lack of training and inconsistent messaging.

And finally, I find that a lack of alignment with marketing has prospects focusing on unrealistic outcomes our sales team can‘t deliver on. Once I’ve identified those gaps, I would start to hone in on ways to remedy those issues and improve those elements.

Step 7: Ideate new initiatives.

Many industry trends are cyclical. They phase in and out of “style.” As you build your sales plan, ideate new initiatives based on opportunities you may have passed on in previous years.

If your business exclusively focused on word-of-mouth and social media marketing in the past, consider adding webinars or special promotions to your plan.

In the edtech example we've been running with, I would likely ideate initiatives based on the gaps I identified in the previous step. I would start a push to ensure that our sales content and marketing collateral are up-to-date and impressive.

I would also consider new training programs to ensure that our coaching infrastructure is prioritizing how to conduct effective demos. Finally, I would start to work on a plan with marketing to ensure our messaging is aligned with theirs — so we can make sure prospects' expectations are realistic and effective.

One way or another, I would take the gaps I found and find concrete, actionable ways to fill them. I would make sure that these initiatives aren't abstract. Just saying, " We're going to be better at demos," isn‘t a plan — it’s a sentiment, and sentiments don't translate to hard sales.

Step 8: Involve stakeholders.

Stakeholders are individuals, groups, or organizations with a vested interest in your company. They are typically investors, employees, or customers and often have deciding power in your business. Towards the end of your sales planning process, involve stakeholders from departments that affect your outcomes, such as marketing and product. It leads to an efficient and actionable sales planning process.

This step is sort of an extension of the previous two — once I‘ve identified the key issues and roadblocks obstructing my edtech startup’s sales org, I would start identifying the right people to fulfill the necessary initiatives I've put together.

In this example, I would tap some stakeholders in charge of our sales content and marketing collateral to produce newer, more relevant case studies and whitepapers we can pass along to the institutions we're working with.

I would also go to middle management and either offer more direction for coaching on demos or bring in a third-party training service to offer more focused, professional insight on the issue.

Finally, I would connect with marketing leadership to align on the benefits and outcomes we generally stress when pitching the schools we sell to. That way, we can ensure that the institutions we're connecting with have realistic expectations of our product or service that we can speak to more clearly and effectively.

Step 9: Outline action items.

Once you have implemented this strategy to create your sales planning process, the final step is outlining your action items. Using your company's capacity and quota numbers, build a list of steps that take you through the sales process. Examples of action items are writing a sales call script, identifying industry competitors, or strategizing new incentives or perks.

In our edtech example, some key action items might be:

• Revamp our prospecting strategy via more involved coaching and re-tooled sales messaging.
• Revamp administrator and college dean buyer personas.
• Conduct new trainings on demoing our software.
• See our new prospecting strategy from ideation to execution.
• Align with our sales enablement stakeholders for new, more relevant case studies and whitepapers.

Obviously, that list isn‘t exhaustive — but those are still the kinds of steps we would need to clarify and take to structure a more effective high-level strategy to produce different (ideally much better) results than we’ve been seeing.

One thing to keep in mind is that sales planning shouldn't end with creating the document.

You‘ll want to reiterate this process every year to maintain your organization's sales excellence.

Now that you‘re committed to the sales planning process, let's dive into the written execution component of sales planning.

Featured Resource: Sales Plan Template

1. Sales Plan Template by HubSpot

Sales 101: Go From Beginner to Pro With These Strategies

22 Best Sales Strategies, Plans, & Initiatives for Success [Templates]

8 Signs That It's Time to Walk Away From a Prospect, According to Sales Leaders

The Power of AI in Sales & 7 Ways You Can Use It in 2024

What is a Sales Funnel? (& What You Should Make Instead)

Outcome-Based Selling: An Overview + Practical Tips

The Ins & Outs of Cold Emailing That Delivers Results

What Is Cross-Selling? Intro, Steps, and Pro Tips [+Data]

Company Growth Strategy: 7 Key Steps for Business Growth & Expansion

9 Bad Sales Habits (& How to Break Them In 2024), According to Sales Leaders

Outline your company's sales strategy in one simple, coherent plan.

Powerful and easy-to-use sales software that drives productivity, enables customer connection, and supports growing sales orgs

Solving your most complex planning challenges

Explore Industry Research

What do Gartner, Forrester, and IDC have in common? They all named Anaplan a planning leader.  

Your success is the heart of our success

Hear from our customers at Anaplan Connect 2024

Join us for a day of connected inspiration from your industry-leading peers who have found the answer in agile, connected enterprise planning.​

Transform how you see, plan and lead your business

Get started today.

Explore on-demand demos to discover how our modeling and planning capabilities are designed to meet the specific and unique needs of your business.

Transform how you see, plan, and lead your business

We’d love to find out how we can help you

Events, training, and content for your planning journey

Visit our blog and newsroom

Your hub for Anaplan updates, insights, perspectives, and innovations.

Powerful partnerships to drive your digital transformation and deliver game-changing strategies. 

• wrappers --> Sales

The beginner’s guide to sales forecasting

• Share on Twitter
• Share on Facebook
• Share on LinkedIn

The platform for orchestrating performance.

Learn how to create an accurate sales forecast with key features and step-by-step examples in our sales forecasting guide

Sales forecasting  is the process of estimating future revenue by predicting how much of a product or service will sell in the next week, month, quarter, or year. At its simplest, a sales forecast is a projected measure of how a market will respond to a company’s go-to-market efforts.

Whether you’re new to sales forecasting or a seasoned pro in need of a refresher, use this blog as your sales forecasting guide.

Why is sales forecasting important?

Forecasts are about the future. It’s hard to overstate how important it is for a company to produce an accurate sales forecast. Privately held companies gain confidence in their business when leaders can trust forecasts. For publicly traded companies, accurate forecasts confer credibility in the market.

Sales forecasting adds value across an organization. Finance relies on forecasts to develop budgets for capacity plans and hiring, and production uses sales forecasts to plan their cycles. Forecasts help sales operations with territory and quota planning, supply chain with material purchases and production capacity, and sales strategy with channel and partner strategies.

There are many types of sales forecasts depending on your go-to-market strategy such as:

• Opportunity forecasting
• Retail sales forecasting
• E-commerce sales forecasting
• Services forecasting
• Consumption-based forecasting
• Run-rate forecasting

These are only a few examples. Unfortunately, at many companies these methodologies stay disconnected, which can produce adverse business outcomes. If information from a sales forecast isn’t shared, for example, product marketing may create demand plans not aligned with sales quotas or sales attainment levels. This leaves a company with too much inventory, too little inventory, or inaccurate sales targets — all mistakes that hurt the bottom line. Committing to regular, quality sales forecasting can help avoid such expensive mistakes.

Close the gap between how you run your business and how you plan for it. Check out our guide for more reliable sales forecasting.

How to accurately forecast sales

To create an accurate sales forecast, follow these five steps:

Assess historical trends

Examine sales from the previous year. Break the numbers down by price, product, rep, sales period, and other relevant variables. Build those into a “sales run rate,” which is the amount of projected sales per sales period. This forms the basis of your sales forecast.

Incorporate changes

This is where the forecast gets interesting. After you have your basic sales run rate, you want to modify it according to several changes you see coming. For example:

• Pricing:  Are you changing the prices of any products? Are there competitors who may force you to modify your pricing schemes?
• Customers:  How many new customers do you anticipate landing this year? How many did you land the previous year? Have you hired new reps, gained quantifiable brand exposure, or increased the likelihood of gaining new customers?
• Promotions:  Will you be running any new promotions this year? What is the ROI on previous promotions, and how do you expect the new ones to compare?
• Channels:  Are you opening any new channels, locations, or territories?
• Product changes:  Are you introducing new products or changing your product suite? How long did it take for previous products to gain traction in the market? Do you expect new products to act similarly?

Anticipate market trends

Now is the time to project all the market events you’ve been tracking. Will you or your competitors be going public? Do you anticipate any acquisitions? Will there be legislation that changes how your product is received?

Monitor competitors

You’re likely doing this already, but take into account the products and campaigns of competitors, especially the major players in the space. Also check around to see if new competitors may be entering your market.

Include business plans

Add in all your business’s strategic plans. Are you in growth mode? What are hiring projections for the year? Are there any new markets you’re targeting or any new marketing campaigns? How might all this impact the forecast?

Once you’ve quantified these things, build them into your forecast. You want everything to be itemized, so you can understand the forecast in as granular a level as possible. Different stakeholders in the company will likely want to understand different aspects of the forecast, so it behooves you to be able to zoom in or out as far as needed.

Keys to success in sales forecasting

Improving the accuracy of your sales forecasts and the efficiency of the forecast methodology depends on multiple factors, including strong organizational coordination, automation, reliable data, and an analytics-based process. Ideally, sales forecasts should be:

• Collaborative.  Leaders should synthesize input from a variety of sales roles, business units, and regions. Frontline sales teams can be of great value here, providing a perspective on the market you hadn’t considered before. 
• Data-driven.  Predictive analytics can reduce the impact of subjectivity, which is often more backward-looking than forward-looking. Using common data definitions and baselines will foster alignment and save time. 
• Produced in real time.  Investing in the real-time capability to course-correct or reforecast allows sales leaders to quickly gain insight so they can make more informed decisions. This enables them to quickly and accurately update the forecast based on demand or market changes.
• Single-sourced with multiple views.  Generating the forecast as a single source of data gives you great visibility into rep, region, and company performance, and helps align different business functions across the organization. 
• Improved over time.  Use the insights provided by an improved sales forecasting process to create more refined future forecasts where accuracy improves over time against a set of accuracy goals.

Companies with more advanced forecasting processes and tools perform better than their peers because they more deeply understand their business drivers and can shape the outcome of a sales period before the period closes.

Top sales forecasting challenges

It can be difficult to produce a consistently accurate sales forecast. Here are some of the top sales forecasting challenges to avoid:

Accuracy and mistrust

When companies use spreadsheets for sales forecasting, they can run into issues with accuracy, which in turn creates a less trustworthy forecast.

Subjectivity

Although producing a quality sales forecast does rely to a small degree on the forecaster making good decisions about how to use the data, in general, companies rely more on judgment and less on credible predictive analytics than they should.

When a sales forecast isn’t generated in a way useful for stakeholders across the company, it becomes far less effective than it should be. A good forecast should produce relevant and understandable data for multiple teams.

Inefficiency

Sales forecasts can be especially difficult to produce when inefficiencies are built into the forecasting process. For example, when a forecast has multiple owners, or the forecast process is not clearly spelled out with a standard set of rules, there can be disputes about how the forecast will be produced.

Company forecasts across the enterprise

To forecast across the enterprise, a company needs different elements from each business function. Here’s what different functions can contribute to the sales forecast:

• Sales:   Provides the bottom-up view, using data from the CRM and PRM, building in judgment from sales leaders. Sales can manage this process through the sales operations function, using the right tools and reporting. 
• Finance:   Provides macroeconomic guidance and works with the product teams. Finance can help integrate the forecast with their financial planning software. 
• Marketing:   Provides macro-market guidance, especially in industries like telecom, retail, and CPG. Marketing can also provide finance teams with market data. 
• Supply Chain:   Provides input on supplies and production. 
• HR:  Assists with sales capacity planning and headcount forecasting based on attrition and staffing needs across every function that touches revenue such as contact centers, professional services, and retail stores.
• IT:  Assists sales forecasting by providing platforms, data, integration, and technical support.

Features to look for in sales forecasting software

Best-in-class sales forecasting software should be able to immediately improve the accuracy of your forecasts and make the forecasting process more efficient.

• Execute sales forecast simulations and outcomes.  Make changes to drivers and execute sales forecast simulations to project future impact on sales performance. 
• Analyze trends, changes, and seasonality of the sales forecast over time.  Develop time-based dashboards and key performance indicators (KPIs), such as velocity calculations, trending analytics, and seasonality fluctuations. 
• Model and analyze “what-if” scenarios . Create “what-if” scenarios and modeling to analyze the impact to the sales forecast if a specific business, economic, or competitive situation were to occur.
• Build sales forecasting calculations with familiar formulas . Apply an easy-to-use formula builder to configure sales forecast benchmarks using familiar formulas and syntax. 
• Snapshot Salesforce CRM accounts and opportunities to compare period-over-period . Compare week-over-week, month-over-month, and year-over-year changes to current periods. 
• Compare forecasts based on multiple modeling techniques.  Create sales forecasts based on qualitative, time series analysis and projection, and casual modeling techniques while determining the degree of uncertainty. 
• Forecast across geographies, products, and accounts.  Develop sales forecasts by geographic locations, product lines, and accounts, or change any of these dimensions to analyze the sales forecast at any granularity of these hierarchies.
• Analyze performance with data visualization.  With built-in dashboards, reporting, and analytics with data visualization you can analyze sales forecast and sales performance metrics to make better decisions with actionable insights.

Why use Anaplan for sales forecasting?

The Anaplan platform is uniquely configured to improve sales forecasting . By putting all relevant employees — salespeople, sales leaders, ops teams, finance, supply chain, marketing, and executives — on the same platform, companies can do the following:

• Increase accountability and ensure the sales team reports sales pipeline activity more accurately.  Identify sales deals at risk, eliminate “sandbaggers,” and reduce overcommits. 
• Standardize sales forecasting and pipeline management.  Provide a single line of sight across the entire organization so everyone has a view into revenue projections, sales projections, and operational insight. 
• Create accurate and trusted sales forecasts.  Enable functional leaders to make better and more informed decisions by providing accurate and trusted sales forecasting to all business units, including sales, finance, operations, HR, and marketing.
• Access data-driven sales benchmarking and trend analysis.  Enable sales leaders to use historical and current sales performance as a benchmark to predict future sales results. Make changes to functional plans and implement these changes across all other business models.

By adopting a  Connected Planning  approach, bringing together people, data, and processes from across the enterprise, companies can produce an accurate sales forecast that connects teams throughout the company. 

Additional sales forecasting resources

Looking for more sales forecasting guidance. Check out these insightful resources:

• White paper: The finance leader’s guide to reliable sales forecasting
• Case study: DocuSign transforms sales forecasting with the Anaplan platform
• Webinar: Increase forecast accuracy with sales planning optimization

Explore our demo series to learn more about Anaplan for sales forecasting

Everything that you need to know to start your own business. From business ideas to researching the competition.

Practical and real-world advice on how to run your business — from managing employees to keeping the books

Our best expert advice on how to grow your business — from attracting new customers to keeping existing customers happy and having the capital to do it.

Entrepreneurs and industry leaders share their best advice on how to take your company to the next level.

• Business Ideas
• Human Resources
• Business Financing
• Growth Studio
• Ask the Board

Looking for your local chamber?

Interested in partnering with us?

Run » finance, how to create a financial forecast for a startup business plan.

Financial forecasting allows you to measure the progress of your new business by benchmarking performance against anticipated sales and costs.

When starting a new business, a financial forecast is an important tool for recruiting investors as well as for budgeting for your first months of operating. A financial forecast is used to predict the cash flow necessary to operate the company day-to-day and cover financial liabilities.

Many lenders and investors ask for a financial forecast as part of a business plan; however, with no sales under your belt, it can be tricky to estimate how much money you will need to cover your expenses. Here’s how to begin creating a financial forecast for a new business.

[Read more: Startup 2021: Business Plan Financials ]

Start with a sales forecast

A sales forecast attempts to predict what your monthly sales will be for up to 18 months after launching your business. Creating a sales forecast without any past results is a little difficult. In this case, many entrepreneurs make their predictions using industry trends, market analysis demonstrating the population of potential customers and consumer trends. A sales forecast shows investors and lenders that you have a solid understanding of your target market and a clear vision of who will buy your product or service.

A sales forecast typically breaks down monthly sales by unit and price point. Beyond year two of being in business, the sales forecast can be shown quarterly, instead of monthly. Most financial lenders and investors like to see a three-year sales forecast as part of your startup business plan.

Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign.

Tim Berry, president and founder of Palo Alto Software

Create an expenses budget

An expenses budget forecasts how much you anticipate spending during the first years of operating. This includes both your overhead costs and operating expenses — any financial spending that you anticipate during the course of running your business.

Most experts recommend breaking down your expenses forecast by fixed and variable costs. Fixed costs are things such as rent and payroll, while variable costs change depending on demand and sales — advertising and promotional expenses, for instance. Breaking down costs into these two categories can help you better budget and improve your profitability.

"Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Tim Berry, president and founder of Palo Alto Software, told Inc . "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such."

Project your break-even point

Together, your expenses budget and sales forecast paints a picture of your profitability. Your break-even projection is the date at which you believe your business will become profitable — when more money is earned than spent. Very few businesses are profitable overnight or even in their first year. Most businesses take two to three years to be profitable, but others take far longer: Tesla , for instance, took 18 years to see its first full-year profit.

Lenders and investors will be interested in your break-even point as a projection of when they can begin to recoup their investment. Likewise, your CFO or operations manager can make better decisions after measuring the company’s results against its forecasts.

[Read more: ​​ Startup 2021: Writing a Business Plan? Here’s How to Do It, Step by Step ]

Develop a cash flow projection

A cash flow statement (or projection, for a new business) shows the flow of dollars moving in and out of the business. This is based on the sales forecast, your balance sheet and other assumptions you’ve used to create your expenses projection.

“If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months,” wrote Inc . The cash flow statement will include projected cash flows from operating, investing and financing your business activities.

Keep in mind that most business plans involve developing specific financial documents: income statements, pro formas and a balance sheet, for instance. These documents may be required by investors or lenders; financial projections can help inform the development of those statements and guide your business as it grows.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Follow us on Instagram for more expert tips & business owners’ stories.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here .

Subscribe to our newsletter, Midnight Oil

Expert business advice, news, and trends, delivered weekly

By signing up you agree to the CO— Privacy Policy. You can opt out anytime.

For more finance tips

3 small business tax tasks to do this fall, how to accept credit card payments, types of credit card machines and terminals: a business guide.

By continuing on our website, you agree to our use of cookies for statistical and personalisation purposes. Know More

Welcome to CO—

Designed for business owners, CO— is a site that connects like minds and delivers actionable insights for next-level growth.

U.S. Chamber of Commerce 1615 H Street, NW Washington, DC 20062

Social links

Looking for local chamber, stay in touch.

Flash Sale Savings ⚡

up to 60% off LivePlan Premium. Save Now

0 results have been found for “”

 Return to blog home

How to Do a Sales Forecast for Your Business the Right Way

Posted june 8, 2021 by noah parsons.

New entrepreneurs frequently ask me for advice about forecasting their sales . These entrepreneurs are always optimistic about the future of their new company. However, when it comes to the details, most aren’t sure how to predict future sales and how much money they’re going to make.

It’s an intimidating task, looking into the future. The good thing is, none of us are fortune tellers and none of us know any more about your new business than you do. (If you do happen to be able to see into the future, please just skip the whole startup thing and go play the stock market. It’ll be much easier and make you richer!)

So, my advice is always to just take a deep breath and relax. You’re as well equipped as everyone else to put together a credible, reasonably accurate forecast. Let’s dive right in and figure it out.

What is sales forecasting?

Sales forecasting is the process of estimating future sales with the goal of better informing your decisions. A sales forecast is typically based on any combination of past sales data, industry benchmarks, or economic trends. It’s a method designed to help you better manage your workforce, ash flow, and any other resources that may affect revenue and sales

It’s typically easier for established businesses to create more accurate sales forecasts based on previous sales data. Newer businesses, on the other hand, will have to rely on market research, competitive benchmarks, and other forms of interest to establish a baseline for sales numbers. 

Check out our detailed guide on creating a full financial forecast without historical data for more.

Why is sales forecasting important?

Your sales forecast is the foundation of the financial story that you are creating for your business. Once you have your sales forecast complete, you’ll be able to easily create your profit and loss statement , cash flow statement , and balance sheet.

Sales forecasts help you set goals

But beyond just setting the stage for a complete financial forecast, your sales forecast is really all about setting goals for your company . You’re looking to answer questions like:

• What do you hope to achieve in the next month? Year? 5-years? 
• How many customers do you hope to have next month and next year?
• How much will each customer hopefully spend with your company?

Your sales forecast will help you answer all of these questions and potentially any others that involve the future of your business.

Sales forecasts inform investors

Having a solid sales forecast also provides a picture of your performance and performance milestones for potential investors. Like you, they want to be sure you have established goals and a firm trajectory for your business laid out. The more detailed, organized, and up-to-date your forecast is, the better you explain the position of your business to third parties and even employees.

How to use your sales forecast for budgeting

Your sales forecast is also your guide to how much you should be spending. Assuming you want to run a profitable business, you’ll use your sales forecast to guide what you should be spending on marketing to acquire new customers and how much you should be spending on operations and administration. 

Now, you don’t always need to be profitable, especially if you are trying to expand aggressively. But, you’ll eventually need your expenses to be less than your sales in order to turn a profit.

How detailed should your forecast be?

When you’re forecasting your sales , the first thing you should do is figure out what you should create a forecast for. You don’t want want to be too generic and just forecast sales for your entire company. On the other hand, you don’t want to create a forecast for every individual product or service that you sell.

For example, if you’re starting a restaurant, you don’t want to create forecasts for each item on the menu. Instead, you should focus on broader categories like lunch, dinner, and drinks. If you’re starting a clothing shop, forecast the key categories of clothing that you sell, like outerwear, casual wear, and so on.

You’ll probably want between three to ten categories covering the types of sales that you do. More than ten is going to be a lot of work to forecast and fewer than three probably means that you haven’t divided things up quite enough.

You really can’t get this wrong. After all, it’s just forecasting and you can always come back and adjust your categories later. Just pick a few to get started and move on.

Which forecasting model is best? Top-down or bottom-up?

Before they have much historical sales data, lots of startups make this mistake—and it’s a big one. They forecast “from the top down.” What that means is that they figure out the total size of the market (TAM, or total addressable market) and then decide that they will capture a small percentage of that total market.

For example, in 2015, more than 1.4 billion smartphones were sold worldwide. It’s pretty tempting for a startup to say that they’re going to get 1 percent of that total market. After all, 1 percent is such a tiny little number, it’s got to be believable, right?

The problem is that this kind of guessing is not based on any kind of reality. Sure, it looks like it might be credible on the surface, but you have to dig deeper. What’s driving those sales? How are people finding out about this new smartphone company? Of the people that find out about the new company, how many are going to buy?

So, instead of forecasting “from the top-down,” do a “bottom-up” forecast. Just like the name suggests, bottom-up forecasting is more of an educated guess, starting at the bottom and working up to a forecast.

Start by thinking about how many potential customers you might be able to make contact with; this could be through advertising, sales calls, or other marketing methods. This is your SOM (your “share of the market”), the subset of your 1 percent of the market that you will realistically reach—particularly in the first few years of your business. This is your target market .

Of the people you can reach, how many do you think you’ll be able to bring in the door or get onto your website? And finally, of the people that come in the door, get on the phone, or visit your site, how many will buy?

Here’s an example:

• 10,000 people see my company’s ad online
• 1,000 people click from the ad to my website
• 100 people end up making a purchase

Obviously, these are all nice round numbers, but it should give you an idea of how bottom-up forecasting works.

The last step of the bottom-up forecasting method is to think about the average amount that each of those 100 people in our example ends up spending. On average, do they spend $20? $100? It’s O.K. to guess here, and the best way to refine your guess is to go out and talk to your potential customers and interview them. You’ll be surprised how accurate a number you can get with a few simple interviews.

How to create a sales forecast

Keep in mind that your sales forecast is an estimate of the number of goods and services you believe you can sell over a period of time. This will also include the cost to produce and sell those goods and services, as well as the estimated profit you’ll come away with.

We’ll dive into specific methods, assumptions, and questions you’ll need to ask in order to build a viable sales forecast. But to start, here are the general steps you’ll need to take to create a sales forecast:

• List out the goods and services you sell
• Estimate how much of each you expect to sell
• Define the unit price or dollar value of each good or service sold
• Multiply the number sold by the price
• Determine how much it will cost to produce and sell each good or service
• Multiply this cost by the estimated sales volume
• Subtract the total cost from the total sales

This is a super basic rundown of what is included in your sales forecast to give you an idea of what to expect. For example, you may find the need to aggregate similar items into unified categories, if you sell a large variety of items. And if at all possible, try to keep your forecasted items grouped similarly to how they appear on your accounting statements to make updates easier.

Check out this video for a quick overview of how to forecast sales:

Now let’s dive into some specific elements of your forecast you’ll need to define ahead of time.

Should you forecast in units or dollars?

Let’s start by talking about “unit” sales.

A “unit” is simply a stand-in for whatever it is that you are selling. A single lunch at a restaurant would be a unit. An hour of consulting work is also a unit. The word “unit” is just a generic way to talk about whatever it is that you are selling.

Now that’s out of the way, let’s talk about why you should forecast by units.

Units help you think about the number of products, hours, meals, and so on, that you are selling. It’s easier to think about sales this way rather than to think just in dollars (or yen, or pounds, or rand, etc.).

With a dollar-based forecast, you are only thinking about the total amount of money that you’ll make in a given month, rather than the details of the number of units that you are selling and the average price you are selling each unit for.

To forecast by units, you predict how many units you’re going to sell each month—using the bottom-up method of course. Then, you figure out what the average price is going to be for each unit. Multiply those two numbers together and you have the total sales you plan on making each month.

For example, if you plan on selling 1,000 units at $20 each, you’ll make $20,000.

When you forecast by units, you have a couple of different variables to play with: What if I’m able to sell more units? What if I raise or lower my prices?

Also, there’s another benefit: At the end of a month of sales, I can look back at my forecast and see how I did compared to the forecast in greater detail. Did I meet my goals because I sold more units? Or did I sell for a higher price than I thought I would? This level of detail helps you guide your business and grow it moving forward.

Sales forecast assumptions

One thing to remember is that your sales forecast is built on assumptions. You’re not predicting the future, but aggregating information to help define your future outlook. These assumptions are always changing, meaning that you’ll need to have a pulse on the following:  

Market conditions

Having a general understanding of the macro effects on your business can help you better predict overall growth. A growing or shrinking market can either provide a low or high ceiling for potential sales increases. So, you need to understand how your business can react to any changes.

What does the broader market look like? Is the economy slowing or growing? Is the industry you operate in seeing an influx of competition? Maybe there’s a labor or material shortage? Are there new customers you now have access to?

Products and services

You may find yourself making regular changes to your products and services. This can be sales factors that impact the customer, or production factors that impact the overall cost. 

Are you making any changes or updates to current offerings? Are you launching a new product or service that compliments or disrupts your existing sales? Are you adjusting prices or sales channels? Are you able to decrease the cost of production? Or are expenses rising due to material, labor, or other production costs?

Seasonality

Depending on what you’re selling, you may find dips or increases in sales at specific times during the year. This seasonality may have to do with the weather, holidays, product/feature releases, or a number of other predictable factors. 

If you have been operating for a while, you can likely look at your accounting data to identify any trends. If you’re a new business look to your competitors to see how they act during specific times of the year to help you identify these trends earlier on.

Marketing efforts

How much you spend on marketing, and even your messaging may have an impact on your overall sales. Make sure that you connect any performance changes to marketing efforts that may affect your performance.

Are you launching a new marketing campaign? Are you spending more or less on advertising? Are you adjusting your targeting for digital ads? Are you branching out or removing specific marketing channels from your overall strategy?

Regulatory changes

You may find that specific laws or regulations directly impact your industry. It’s difficult to anticipate what legislation will provide a negative or positive impact, and just how often this type of regulatory change may occur. The best thing you can do is keep your ear to the ground, and be ready to adjust expenses or sales when any changes appear to make traction.

How far forward should you forecast?

I recommend that you forecast monthly for 12 months into the future and then just develop an annual sales forecast for another three to five years.

The further your forecast into the future, the less you’re going to know and the less benefit it’s going to have for you. After all, the world is going to change, your business is going to change, and you’ll be updating your forecast to reflect those changes.

12 months from now is far enough into the future to guess. You’ll have to update your forecasts regularly with actual performance to help keep them accurate. 

And don’t forget, all forecasts are wrong—and that’s O.K. Your forecast is just your best guess at what’s going to happen. As you learn more about your business and your customers, you can change and adjust your forecast. It’s not set in stone.

Why using visuals will make forecasting easier

My final word of advice is to make sure that you graph your monthly sales with a chart.

A chart will make it easy to see how your sales might dip during a slow period of the year and then grow again during your peak season. A chart will also highlight potentially unreasonable guesses at your sales growth. If for example, you show a big jump in sales from one month to the next, you should be able to back this up with a strategy that’s going to deliver those sales.

Adjust your forecasts based on actual results

Your sales forecast isn’t done when you start sharing it with lenders and investors. Instead, smart businesses use their sales forecast to measure their progress and ensure that they’re on the right track. Their sales forecast becomes a live forecast . An up-to-date management tool that helps them run their business better.

The easiest way to convert your sales forecast into a management tool is to have a monthly financial review meeting where you look at your business’s finances. You shouldn’t just look at your accounting system, though. You should compare the numbers from your accounting software to your forecast and see if you’re on track. 

Are you exceeding your goals? Or maybe you’re falling a little bit short. Either way, knowing if you’re meeting your goals or not will help you determine if you need to make some shifts in strategy. This way, your business numbers drive your strategy.

Forecasting is easier with LivePlan

Sales forecasting tools like LivePlan can help with this. LivePlan uses a smart dashboard to automatically compare your forecast to your numbers from your accounting system—no cutting and pasting or complicated spreadsheets required. And with LivePlan’s LiveForecast feature , you can update the forecasts within your Profit and Loss Statement, with the push of a button. 

This allows you to spend less time updating and more time analyzing performance to make better decisions. In fact, the LiveForecast feature allows you to expand the details of your performance and identify the variance in performance within your statements. You’ll know your current cash position and the impact on projected year-end totals at a glance. It provides you with enough information to then explore the dashboard with questions and potential steps in mind.

Sales forecasting isn’t as difficult as you think

Just remember that sales forecasting doesn’t have to be hard. Anyone can do it and you, as an entrepreneur, are the most qualified to do it for your business. You know your customers, and you know your market, so you can forecast your sales.

Like this post? Share with a friend!

Noah Parsons

Posted in financials, join over 1 million entrepreneurs who found success with liveplan, like this content sign up to receive more.

Subscribe for tips and guidance to help you grow a better, smarter business.

You're all set!

Exciting business insights and growth strategies will be coming your way each month.

We care about your privacy. See our privacy policy .

How to calculate a sales forecast for a new business

Table of Contents

Definition of a sales forecast

The uses of a sales forecast, how to calculate sales forecast for a new business, calculate a sales forecast using the accounts of your competition , calculate a sales forecast using a target market, manage your finances with countingup.

When you’re running a business, you should always keep one eye on the future. If you don’t have a rough idea of what the next week, month, or year might bring, you’ll be at a disadvantage when making business decisions. This means that calculating a sales forecast is essential, especially when you’re just starting a business or beginning to write a business plan . 

Sales forecasting can be tough if you don’t have much business experience, but we’re here to help. This article will cover a range of different topics related to sales forecasting, including:

Creating a sales forecast is the first step in managing your company’s cash flow . Your cash flow is the movement of money in and out of your business. By forecasting your sales, you’ll be able to predict your gro s s profit and net profit , which means you can start anticipating what money you’ll have to spend on running your business for the next month. 

Put simply, a sales forecast is a prediction of how much you’re going to sell in the coming month. This forecast doesn’t need to be a guess — it’s possible to calculate a fairly accurate forecast with some thorough research. The focus of your research will differ depending on which sales forecast method you pick.

Firstly, your sales forecast is important because it helps you set sales goals . Measuring the success of your business is a vital part of deciding its future, and setting sales goals is one of the simplest ways to measure success. 

If you have an accurate sales forecast, you’ll be able to set realistic sales goals. You’ll want your goals to be realistic, as this will give the clearest picture of how well your company is doing and if significant changes are needed.

Similarly, sales forecasts can also help create an accurate budget for your business. As a sales forecast is essential for predicting the money your business will make, it also plays an important part in working out how much money you’ll have to spend. 

Finally, sales forecasts help with finding investors for your business . If you’re looking for financial support to start your business, any investor you approach will likely be interested in the amount of money you expect the business to make. If you’ve created a sales forecast, you’ll be able to provide this information.

Large, well-established businesses rely on the sales figures of previous months to calculate their sales forecasts for the future. While having previous sales figures helps create more accurate forecasts, it’s not essential. There are a couple of methods new businesses can use to calculate their sales forecasts, even if they don’t have a sales history to look back at.

It’s always a good idea to research the competition when you’re setting up a new business. This is also true when calculating a sales forecast, but it depends on the type of businesses that make up your competition.

If any of your competitors are registered with the government as limited companies , they will have to make their accounts publicly available. These accounts will contain things like their monthly expenses, total profits, and (most importantly) the money they’ve made from sales. 

Using this last figure, you can work out how much your competitors are making from sales each month, and get a reasonable estimate of your own sales. You can find these accounts by searching for your competitor’s business on Companies House .

Please note that this method isn’t effective if your competitors are sole traders , as this means they won’t need to publish their accounts publicly. In this instance, you should use the forecasting method below. 

This method is known as ‘bottom-up’ forecasting, as you start at the bottom — your potential market of customers — and then work up to a forecast — the percentage of those customers that make a purchase.

The first step of this method is identifying your target market . This is the section of the population that you think will be interested in your product. With a little market research — things like sending out surveys, or posting polls on social media — you can work out how many people are in your target market. 

Once you have the size of your target market, you need to make realistic estimates of how many people will make a purchase. For example, if 1000 people in the local area are potential customers, you should expect 10% to visit your store or website, and 1% to actually make a purchase.

This method of calculating a sales forecast is good because it’s very adaptable. If you get many more or far fewer sales than you originally calculated, then you can adjust your figures accordingly and record the new forecast. 

It’s also a good idea to categorise this sort of sales forecast. Instead of estimating your overall sales, estimate the sales of each type of product you sell. That way, you can use the forecast to work out how many of each product to make or order each month. 

Creating a sales forecast is a great start, but it’s only the first part of managing your sales revenue. Once you start making sales and money starts coming in, you’ll need to track that cash so you can work out where to spend it. If you think you might have trouble with this, try using a financial software tool like Countingup.

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward!  Find out more here .

• Counting Up on Facebook
• Counting Up on Twitter
• Counting Up on LinkedIn

Related Resources

What is the difference between an invoice and a receipt.

As a small business owner or freelancer, you’ll have heard of receipts and

Small business health checklist

Running a business can be a fairly hectic job. There’s often so much

What is financial reporting? 8 must-measure metrics for small businesses

Financial reporting is a crucial part of any business. After all, you need

What is the difference between gross and net profit

Profit is categorised in two ways: gross and net. Each is important in

How to set prices for your small business

Your prices decide whether customers will buy your products or those of your

What are key performance indicators?

To gauge the success of your small business, you need to dive deeper

How to track expenses for a small business

Part of owning a business is spending money to keep it running. Any

What insurance does a self-employed hairdresser need?

As a self-employed hairdresser, you’re open to risks in your everyday work. Whether

What are assets and liabilities in a business?

Anyone going into business needs to be familiar with assets and liabilities. They

Personal car for business use: How does it work?

Access to a car is a must for most businesses, meaning that travel

Advantages and disadvantages of using personal savings in business

Have you got a new business idea? And are you considering using your

How to pay Corporation Tax

Corporation Tax is the main tax your limited company has to pay every

Please note that the contents of this site are not being updated since October 1, 2023.

As of October 2, 2023, Acclr Business Information Services (Info entrepreneurs) will be delivered directly by CED’s Business Information Services . To find out more about CCMM’s other Acclr services, please visit this page: Acclr – Business Services | CCMM.

• Advice and guidance
• Starting a business
• Personalized Guidance
• Seminars on Business Opportunities
• Certification of Export Documents
• Market Studies
• Export Financing
• International Trade Training
• Connection with the World Bank
• Trade Missions
• SME Passport
• Export Resources
• Import Resources
• Networking Activities
• Networking Training
• CCMM Member Directory
• Market Studies and Research Services
• Business plan
• Registration and legal structures
• Guidance for Drafting a Business Plan
• Help in Seeking Funding
• News, Grants, and Competitions
• Funding Meet-and-Greet
• Resources for Drafting a Business Plan
• Regulations / Permits / Licences
• Personalized Market Information Research
• Personalized Meetings with Guest Experts
• Government Subsidies and Programs
• Training for your employees
• Employee Management
• Interconnection Program
• Wage Subsidies
• French courses
• Merchant-Student Pairing
• Intellectual property
• Marketing and sales
• Operations management
• Hiring and managing human resources
• Growth and innovation
• Importing and exporting
• Calls for tenders
• Support organizations
• Sale / Closure / Bankruptcy
• Business intelligence
• Business lists and profiles
• Market data
• Market trends
• Business advice
• Business plan management consultant
• Legal structures consultant
• Accounting consultant
• Legal consultant
• Export certification
• Resource centre

Forecast and plan your sales

Accurately forecasting your sales and building a sales plan can help you to avoid unforeseen cash flow problems and manage your production, staff and financing needs more effectively.

A sales forecast is an essential tool for managing a business of any size. It is a month-by-month forecast of the level of sales you expect to achieve. Most businesses draw up a sales forecast once a year.

Armed with this information you can rapidly identify problems and opportunities - and do something about them.

While it's always wise to expect the unexpected, a well-constructed sales plan, combined with accurate sales forecasting, can allow you to spend more time developing your business rather than responding to day-to-day developments in sales and marketing.

This guide shows you how to put together a sales forecast and a sales plan.

A basis for sales forecasts

Your sales assumptions, developing your forecast, avoiding forecasting pitfalls, creating a sales plan.

Sales forecasts enable you to manage your business more effectively. Before you begin, there are a few questions that may help clarify your position:

• How many new customers do you gain each year?
• How many customers do you lose each year?
• What is the average level of sales you make to each customer?
• Are there particular months where you acquire or lose more customers than usual?

Existing businesses

The starting point for your sales forecast is last year's sales.

Before you factor in a new product launch, or an economic trend, look at the level of sales for each customer last year. Do you know of any customers who are going to buy more - or less - from you next year?

In the case of customers who account for a significant value of sales, you may want to ask them if they plan to change their purchase level in the foreseeable future.

New businesses

New businesses have to make assumptions based on market research and good judgement.

Every business can also add in the new customers that it expects to attract without actually knowing who they are, or what they will buy. Simply enter "new customer" on your forecast.

Depending on your type of business, you may want to specify the volume of sales in the forecast - for example, how many 3.78-litre cans of paint you sell - as well as the value of sales. By knowing the volume, you can plan the necessary resources in areas such as production, storage and transport.

Every year is different so you need to list any changing circumstances that could significantly affect your sales. These factors - known as the sales forecast assumptions - form the basis of your forecast.

Wherever possible, put a figure against the change - as shown in the examples below. You can then get a feel for the impact it will have on your business. Also, give the reasoning behind each figure, so that other people can comment on whether it's realistic.

Here are some typical examples of assumptions:

• The market you sell into will grow by 2 per cent.
• Your market share will shrink by 2 per cent, due to the success of a competitor.

Your resources

• You will double your sales force from three people to six people, halfway through the year.
• You will spend 50 per cent less on advertising, which will reduce the number of enquiries from potential customers.

Overcoming barriers to sale

• You are moving to a better location, which will lead to 30 per cent more customers buying next year.
• You are raising prices by 10 per cent, which will reduce the volume of products sold by 5 per cent but result in a 4.5 per cent increase in overall revenue.

Your products

• You are launching a range of new products. Sales will be small this year and costs will outweigh profits, but in future years, you will reap the benefits.
• You have products that are newly established and that have the potential to increase sales rapidly.
• You have established products that enjoy steady sales but have little growth potential.
• You have products that face declining sales, perhaps because of a competitor's superior product.

For new businesses , the assumptions need to be based on market research and good judgement.

Start by writing down your sales assumptions. See the page in this guide on your sales assumptions.

You can then create your sales forecast. This becomes easy once you've found a way to break the forecast down into individual items.

• Can you break down your sales by product, market, or geographic region?
• Are individual customers important enough to your business to warrant their own individual sales forecast?
• Can you estimate the conversion rate - the percentage chance of the sale happening - for each item on your sales forecast?

For example, you might predict that a customer will purchase $1,000 worth of products. If you estimate that there's a 70 per cent chance of this happening, the forecast sales for this customer are $700, i.e. 70 per cent of $1,000.

Selling more of your product to an existing customer is far easier than making a first sale to a new customer. So the conversion rates for existing customers are much higher than those for new customers.

You may want to include details of which product each customer is likely to buy. Then you can spot potential problems. One product could sell out, while another might not move at all.

By predicting actual sales, you're forecasting what you think will be sold. This is generally far more accurate than forecasting from a target figure and then trying to work out how to achieve it.

The completed sales forecast isn't just used to plan and monitor your sales efforts. It's also a vital part of the cash flow.

There is a wide range of sales forecasting software available that can make the whole process much simpler and more accurate. This software generates forecasts based on historical data. If you are considering buying software, get advice from an IT expert, your trade association, your business advisors and businesses of a similar size and in similar markets.

Five common forecasting pitfalls are:

Wishful thinking

It's all too easy to be over-optimistic. It's a good idea to look back at the previous year's forecast to see if your figures were realistic. New businesses should avoid the mistake of working out the level of sales they need for the business to be viable, then putting this figure in as the forecast.

You also need to consider if it is physically possible to achieve the sales levels you're forecasting. For example:

• one taxi can only make a certain number of airport trips each day
• a machine can only produce a given number of components on each shift
• a sales team can only visit a certain number of customers each week

Ignoring your own assumptions

Make sure your sales assumptions are linked to the detailed sales forecast, otherwise you can end up with completely contradictory information. For instance, if you assume a declining market and declining market share, it's illogical to then forecast increased sales. For more information, see the page in this guide on your sales assumptions.

Moving goalposts

Make sure the forecast is finalised and agreed within a set timescale. If you're spending a lot of time refining the forecast, it can distract you from focusing on your targets. Avoid making excessive adjustments to the forecast, even if you discover it's too optimistic or pessimistic.

No consultation

Your sales people probably have the best knowledge of your customers' buying intentions, therefore:

• ask for their opinions
• give them time to ask their customers about this
• get the sales team's agreement to any targets that will be set

No feedback

Having built your sales forecast, you need someone to challenge it. Get an experienced person - your accountant or a senior sales person - to review the whole document.

The questions you should answer in your sales plan are:

• What are you going to focus on?
• What are you going to change?
• In practical terms, what steps are involved?
• What territories and targets are you going to give each salesperson or team?

The sales plan will start with some strategic objectives . Here are some examples:

• break into the municipal market by adapting your product for this market
• open a store in an area that you believe has the potential for generating lots of sales
• boost the average sale per customer

You can then explain the stepping stones that will allow you to achieve these objectives. Use objectives which are SMART - Specific, Measurable, Achievable, Realistic, Time-bound.

Using the example of breaking into the municipal market, the stepping stones might be to:

• hire a sales person with experience of the municipal market on a salary of $48,000 by the beginning of February
• fully train the sales person by mid April
• ensure that any changes the product development team has agreed to make are ready to pilot by the beginning of April

As well as planning for new products and new markets, explain how you're going to improve sales and profit margins for your existing products and markets. It is often helpful to identify how you will remove barriers to sales:

• Can you increase the activity levels of the sales team - more telephone calls per day, or more customer visits per week?
• Can you increase the conversion rate of calls into sales - through better sales training, better sales support materials or improved sales incentives?

Original document, Forecast and plan your sales , © Crown copyright 2009 Source: Business Link UK (now GOV.UK/Business ) Adapted for Québec by Info entrepreneurs

Our information is provided free of charge and is intended to be helpful to a large range of UK-based (gov.uk/business) and Québec-based (infoentrepreneurs.org) businesses. Because of its general nature the information cannot be taken as comprehensive and should never be used as a substitute for legal or professional advice. We cannot guarantee that the information applies to the individual circumstances of your business. Despite our best efforts it is possible that some information may be out of date.

• The websites operators cannot take any responsibility for the consequences of errors or omissions.
• You should always follow the links to more detailed information from the relevant government department or agency.
• Any reliance you place on our information or linked to on other websites will be at your own risk. You should consider seeking the advice of independent advisors, and should always check your decisions against your normal business methods and best practice in your field of business.
• The websites operators, their agents and employees, are not liable for any losses or damages arising from your use of our websites, other than in respect of death or personal injury caused by their negligence or in respect of fraud.

Need help? Our qualified agents can help you. Contact us!

• Create my account

The address of this page is: https://www.infoentrepreneurs.org/en/guides/forecast-and-plan-your-sales/

INFO ENTREPRENEURS

380 St-Antoine West Suite W204 (mezzanine level) Montréal, Québec, Canada H2Y 3X7

www.infoentrepreneurs.org

514-496-4636 | 888-576-4444 [email protected]

Consent to Cookies

This website uses necessary cookies to ensure its proper functioning and security. Other cookies and optional technologies make it possible to facilitate, improve or personalize your navigation on our website. If you click "Refuse", some portions of our website may not function properly. Learn more about our privacy policy.

Click on one of the two buttons to access the content you wish to view.

Stop losing winnable deals

Thank you for your submission., 6 sales forecast examples that generate more accurate predictions.

Jonathan Costet

Written by Jonathan Costet

Sales forecasting is a crucial activity for high-performing sales teams. It helps them create concrete action plans to close more deals in any given quarter.

The problem is there doesn’t seem to be a whole lot of consensus on  how  to actually do a sales forecast.

Teams of all sizes use a bunch of different methods, making it difficult for those of us looking to put together our first sales forecast to understand what steps to take.

In this article, we’re going to look at six different sales forecast examples using different forecasting methodologies so you can understand and decide which calculation makes the most sense for your organization.

What is sales forecasting? 

Before we get into the examples, let’s all get on the same page:

What is sales forecasting anyway?

Sales forecasting is the process of looking forward and projecting what your sales revenue will look like in the coming financial period (usually monthly or quarterly). 

While some financial forecasts might look at a year or even two in the future, sales forecasts are much more tangible and shouldn’t look any further than three months ahead.

There are a number of different ways to forecast sales (we’re going to look at six of them shortly), but most of them look at a combination of historical data (previous sales), current information ( pipeline reviews  and salesperson judgment), and forward-looking estimates (such as new products that are about to hit the market).

Generally speaking, sales leaders are responsible for sales forecasting duties, though they often involve their sales team in this process, particularly if they’re using a pipeline-based methodology.

Sales leaders then forward their sales forecasts up the chain to senior leadership and finance leaders to make important decisions that inform changes to the  sales strategy , investments, and resourcing choices.

What’s important when creating a sales forecast? 

Sales forecasting should be largely data-driven.

Yes, it’s okay to rely a little on your own intuition and the judgment of your sales reps (they’ll need to tell you how likely it is that a certain deal will close, for instance), but hard data should be your foundation.

So, you’re going to need:

• A clean and up-to-date sales pipeline.  Push your reps to keep it updated with deal probabilities loaded in and all lead cards in the  correct pipeline stages .
• An understanding of previous performance.  Pull your numbers from the past few quarters and analyze growth trends that may be applicable to your forecast.
• Lead scoring/rankings.  If your sales team uses a lead scoring or ranking system, this data may prove helpful in formulating a forecast.
• Industry/competitive analysis . It will be important to know of any major changes in your industry. For example, a new market entrant may disrupt sales, as might a legislative change relevant to your vertical. 

Gather the above information, then dive into your sales forecast, using the below examples as a reference.

Still need more guidance?

Get our expert tips on how to create your sales forecast .

6 sales forecast examples 

Ready to create your own sales forecast but not sure where to start?

Explore six different sales forecast examples below, each using a different methodology for projecting sales revenue.

Note the differences, and choose the sales forecasting methodology that best suits your organization.

1. Historical data forecast 

A historical data sales forecast is exactly as it sounds.

You’re going to look at historical sales records (i.e., sales volumes and revenue figures for previous quarters) and use them to estimate future sales.

A smarter historical data forecast would take into account growth trends. Note that in the above example, sales revenue is growing at $20k per quarter. So, we could assume that if our quarter four sales revenue was $290k, quarter one of the following year should be $310k.

Historical forecasting is great because it’s easy, but that’s about it.

As your stockbroker will tell you (if they’re honest): ”past performance is not indicative of future results.”

That’s the major drawback of relying solely on historical data for sales forecasts; you’re not taking into account what’s happening right now (in your pipeline and in the market).

2. Opportunity stage probability forecast 

This kind of sales forecast looks at the deals you have in your sales pipeline right now and builds a projection based on:

• The probability of closing at each stage of the sales process
• The expected revenue from each deal

This type of forecast obviously depends on you having that data available, meaning your sales reps need to be proactive with adding deal amounts to each card, and you need to have deal stage probabilities loaded in based on historical performance.

Let’s say you have the following deal stage probabilities: 

• Prospecting – 10% 
• Qualification – 25%
• Proposal – 40%
• Negotiation – 60%
• Closing – 90%

First, analyze each sales opportunity and add up the expected future revenue from each deal. Let’s say yours looks like this:

• Prospecting – $2.5m 
• Qualification – $1.2m
• Proposal – $800k
• Negotiation – $700k
• Closing – $450k

For this sales forecasting model, you’ll simply multiple the revenue projections for each deal stage by the average sale probability at each stage, for example:

• Prospecting – $2.5m x 10% = $250k
• Qualification – $1.2m x 25% = $300k
• Proposal – $800k x 40% = $320k
• Negotiation – $700k x 60% = $420k
• Closing – $450k x 90% = $405k

Your sales forecast, in this case, is the total across all deal stages (in this case, $1.695m).

Deal stage probability is one of the more accurate sales forecasting methods, plus it’s pretty easy to pull together (at least if you use a  revenue intelligence platform ).

It does have a couple of drawbacks, however.

First neglects to include the age of each deal. A 3-month-old deal sitting in Qualification doesn’t have the same likelihood of closing as a 3-day-old deal, right?

Secondly, the opportunity stage probability forecast assumes that conversion rates remain constant from one period to the next. We know this isn’t always the case, and thus can lead to wide gaps in the accuracy of your forecasts.

Looking at the above example, if we were to lose 10% conversion rate in the Closing stage, the forecast would be around $45k off.

3. Sales cycle forecast 

The sales cycle method covers what the previous sales forecasting process missed: the age of each sales opportunity.

Busy sales pipelines often include old deals (even though that’s commonly a sales manager no-no), so the  sales cycle  forecasting method takes this into account.

With this method, you compare the age of the deal to the average sales cycle length. You’ll need to come up with a weighting system based on deal age.

Let’s say, for example, that the average period of time for a deal to close at your organization is 62 days, and we’re going to weight deals into five categories:

• Over 62 days – 10% close likelihood
• 45-62 days – 30% close likelihood
• 31-44 days – 45% close likelihood
• 18-30 days – 35% close likelihood
• 0-18 days – 25% close likelihood

Then, you’ll multiply each deal’s relevant close likelihood by its expected revenue, add it all up, and there’s your sales forecast.

The sales cycle forecasting method is similar to the deal stage probability forecast in that it has a drawback. It pays attention to the age of each opportunity but ignores historical probability based on the pipeline stage that deal is in.

For more accurate sales forecasts, consider using both approaches and then taking an average figure.

Need a refresher on sales cycles? Here’s our complete guide to understanding the sales cycle .

4. Bottom-up forecast 

The pipeline-based sales forecast is probably the most commonly used method for creating sales projections.

It’s one of the best ways to build an accurate forecast because it’s purely based on the deals your team has in play right now.

Of course, you’ll need to rely on what your reps say about the likelihood of each deal closing, but you trust them, right?

With this methodology, sales organizations perform a thorough pipeline review, going through each deal on the table and asking:

• What’s likely to close (and what isn’t?)?
• Why or why not?
• What’s the dollar value of each of these sales deals?
• What time periods are we looking at? (i.e., are they going to close in the upcoming months that we’re currently forecasting for?

Then, you simply add up the total value of each of the deals, and there’s your forecast.

If you want to get a little more sophisticated, you can combine other types of forecasts, using actual sales data from previous periods and historical deal stage probabilities to supplement sales rep intuitions.

Or, you can just jump straight in with your  Bottom-Up Sales Forecast Template for Excel .

5. Top-down sales forecast

Top-down sales forecasts don’t look at what you’ve got in the pipeline now. Instead, they assess the total revenue value of the target market (which we call the total addressable market) and your company’s ability to capture that revenue.

Here’s how it works:

First, you need to determine what the TAM dollar value is. Let’s say in your industry, it’s $250m.

Then, you look at your market share. Maybe you own 10% of the market.

From here, it’s just a bit of simple math: $250m x 10% = $25m. What’s your annual sales forecast?

As you’re probably thinking, this isn’t the most accurate forecasting method. It relies on a knowledge of your available market, but that doesn’t mean they’re ready to buy.

Plus, it doesn’t take into account:

• Your sales team’s ability to close deals
• Your marketing team’s developments for the coming period
• Changes to the business plan which may impact monthly sales

The top-down sales forecast is best used by those who are new to the market and who can’t analyze a sales pipeline or review historical sales data.

6. Multi-variable forecast 

Multi-variable sales forecasts are a little complicated, but they’re the most accurate around.

More typically used by larger organizations, multi-variable forecasts combine the approaches we’ve looked at above.

For instance, you might start with a pipeline review led by your sales reps, based on their own intuition and understanding of what opportunities are likely to turn into sales.

Then, you’ll check out the historical sales trend. How fast is sales revenue growing? 3% a quarter? How does that align with the pipeline-based forecast?

You may also compare sales rep predictions with deal stage probabilities to assess accuracy (or maybe your probabilities need updating).

On the whole, there is no single way to perform a multi-variable sales forecast. Each organization uses a different formula.

We’d recommend experimenting with each of the above methods and assessing which are the most accurate for your company.

Then, you can build a multi-variable calculation that makes sense.

Dive into sales forecasing with Gong

Sales forecasting can be a painful, long-winded process that takes a large team of reps, managers, and sales leaders days of meetings and dredging through reports. 

Notice, though, that we said  can .

That’s because if you’re savvy with a bit of tech, you can get your  sales forecasting software  to take care of the whole thing for you or at least help you get there  much  faster.

Ready to dive in?  Get our free sales forecasting template here  and start making more accurate revenue projections.

See the magic of Gong in action

Related articles, these 6 crucial stages define a b2b sales funnel (plus examples).

• Sales and Revenue Operations
• Sales Engagement
• Sales Forecasting
• Sales Management

Introduction to the Gong mobile app

11 surefire ways to shorten your sales cycle.

• Selling Skills

Atlanta Office 756 West Peachtree Street Northwest, Suite 04W101 Atlanta, GA 30308

Chicago Office 167 North Green Street, Suite 04A-105 Chicago, IL 60607

Dublin Office Grand Canal House, 1 Grand Canal Street Upper Dublin D04 Y7R5 Ireland

Israel Office 40 Tuval Street 39th Floor Ramat Gan 52522

San Francisco Office 201 Spear St. 13th Floor, San Francisco, CA 94105

Utah Office 1633 W Innovation Way, Suite 05-106 Lehi, UT 84043

• Conversation Intelligence
• Gong Insights
• Ask Anything
• Call Spotlight
• Platform Tour
• Customer Success
• Strategic Initiatives
• Deal Execution
• Integrations
• Gong Partner Network
• Language Support
• Resource Hub
• Case Studies
• Reveal: The RI Podcast
• Revenue Intelligence Glossary
• Operating Principles
• Leadership Principles
• Golden Gong Awards
• Advocacy Program
• Outstanding Gongsters
• Revenue Intelligence
• Call Recording Software
• Call Software
• Revenue Operations Software
• Sales Coaching Software
• Auto-Dialer Software
• Revenue Management Software
• Log Record Calls in Salesforce
• Sales Training
• Sales Engagement Platform

Copyright 2024 Gong.io Inc. All rights reserved. Various trademarks held by their respective owners.

For Patent and Trademark Legal Notices, please  click here .

• Terms & Conditions
• Privacy Policy
• Your Privacy Choices
• Service Status

Demodesk Coaching & AI

Record, transcribe, translate & analyze all meetings, and coach teams at scale using cutting edge AI - works with your favorite conferencing or dialing software.

How to Build a Sales Forecasting Plan (+ Template)

Sales forecasting is a critical component to a sales team's success, yet many organizations don't have a structured plan. In fact, a recent report found that 67% of sales organizations do not use formal forecasting plans.

Why should forecasting be a focus for sales leaders? Creating a sales forecasting plan for your team can lead to increased growth, revenue, and performance. Knowing how to forecast sales will also help with setting achievable and accurate quotas for your reps. Lastly, sales forecasting impacts the entire company — these reports are used to dictate budgets, planning, and future strategy.

There are many ways to forecast sales. It’s important to know where to start and what information to incorporate when creating a forecasting system for your team.

In this article, we’ll break down what you’ll need to build a sales forecasting plan. We’ll also give an overview of different forecasting approaches based on company specifics and general characteristics of effective plans.

Where to start with sales forecasting

If you want to know how to forecast sales, you will first need to clarify and collect some pertinent information. Before you begin building your sales forecasting plan, start with the following:

What are your objectives?

What are your sales goals? Are you hoping to grow revenue by a certain percentage? Are you launching a new product and want to focus on those sales in particular? Figure out what your specific objectives are first. This will help you build a specialized plan for your goals and set up accurate quotas for your reps.

Use historical data for initial insights

History is the best teacher, so pull as much statistical data as you can regarding the team’s past sales performance. Also, pull any relevant industry information like market growth research and economic insights, particularly if you have a seasonal business model. All of this historical data will be an important tool for building your sales forecast plan. Once you’ve determined your department’s (and company’s) objectives and have collected the applicable information, then you can look at which forecasting style would be best suited for your particular sales team.

How to approach sales forecasting

Your forecasting process will depend on a few different factors like your specific industry as well as the growth stage of your business. Here are a few items to keep in mind when deciding how to begin forecasting your sales.

Sales organization components

Take into consideration additional elements like your sales team's business maturity, the size of your team, the specifics of the product you’re selling, and the department’s current budget. Importantly, note the consistency of the incoming sales data. Are you receiving all the necessary information in a consistent (and timely) fashion to make precise estimations?

Company growth stage

The company’s current size and business stage will have an impact on how you forecast sales. For example, take the forecasting differences between startups and established businesses:

‍ Sales forecasting for startups

‍ Startup businesses will require a simple forecasting method since there is no historical data to reference for future insights. In addition, the company’s goals are typically more focused on growth strategy and investor financing, so forecasting will need to come from a structured sales process.

This means you must solidify a sales process first and invest in a CRM tool to streamline data collection and trackability. Once more data has been compiled, then you’ll be able to evaluate reports and create adjustments to your forecasting plan.

Since there is a lack of historical data, you will need to utilize other sources for information. Feedback and insight from your sales reps (and their prospects) will be influential, along with additional research from consumer reports, market research, and industry contacts.

Sales forecasting for medium/large sized business

‍ With more established companies, there is historical information available to reference. Using this quantitative data, you can incorporate more complex reporting methods and algorithms, which means the forecasting plan you choose can get more granular.

Also, a more established company will have additional information when it comes to repeat business statistics versus new client expectations. This will help define your forecast even further

Bottom-up vs top-down forecasting

Generally speaking, there are two ways to forecast sales. You can generate estimations from either the top-down or the bottom-up, depending on your sales data.

Bottom-up forecasting starts with the information specific to your product — the average price per sale multiplied by the expected number of sales — and then expands from there. Additional factors like your website traffic data, outreach numbers, sales team size, and marketing statistics will also come into play. In simpler terms, bottom-up forecasting begins with a micro view of your business, then moves upward.

On the opposite side, top-down forecasting is a macro view of your sales forecast. With this method, you would start with the size of the market — or total addressable market (TAM) — and then forecast how much of that market you would be able to occupy for the upcoming year. This method has far less detailed data since it’s more of a general estimation, but may be helpful for newer companies with no historical sales data.

If you are trying to decide which forecast style to implement, one of the best solutions is to use both! By utilizing both methods, you are more likely to find a middle ground with your estimations, which means they are more likely to be accurate.

Once you finalize your reporting approach, it’s time to build your sales forecasting plan.

Building the sales forecasting plan:

Now that you have collected all the relevant data and decided on the best forecast style for your team, you can use that information to begin to build your plan. Here’s a quick guide to help you start:

1. Determine forecasting timing

The type of plan you build will depend on if you want to forecast all sales within a certain period of time (quarterly, monthly, etc) or if you want to track sales for a particular output only.

Also, consider any seasonality factors when it comes to your products. For example, if you have an additional product release every Q4, then your forecasting plan may need to look different for that quarter specifically.

2. Breakdown sales cycle

Define your sales cycle by creating a breakdown of the average time spent in each stage — leading you to determine the average length of your particular sales cycle. This helps to understand the timeline for each sale, which feeds directly into the forecast.

3. Utilize current sales metrics

Using the historical data you already pulled, define additional variables like average sale prices and renewal rate percentage. Incorporate your Annual Recurring Revenue (ARR) numbers, as well as your conversion rates, turn rates, and average growth trajectory.

4. Create a template

Based on your sales cycle, metrics, objectives, and sales team specifics create a template that incorporates all of these factors. You can build your own template from scratch (download the template below) or you can use an automated forecasting tool that connects to your CRM for an easier transition. Here are some resource examples:

• Excel: Using an excel template is an efficient choice if you have a small sales team or limited products to track.
• Automation tools: If you use automation for your sales process, then there may be an integrated forecasting-style feature within the software. For example, the Lead Enrichment software Cognism automatically predicts the likelihood of a prospect converting. This insight is a helpful addition to your estimation of future sales.
• Pick a method: You can choose from multiple forecasting methods that can help ensure accuracy within your plan. Based on your forecasting approach, choose a method that accommodates it . For example, if you are a medium-sized business with a sizeable sales team, a good amount of past sales data available, and a sophisticated CRM system, then a multivariable or historical forecasting method could be a good fit.

5. Formalise and share with the team

Once you’ve created your plan, formally document the process for full sales team transparency. It’s important that sales reps know how you are forecasting their sales — insight into the overall process will lead to a better understanding of their quotas and goals.

‍Characteristics of successful sales forecasting plans

Sales forecast plans are unique to each company. However, there are some general characteristics of successful plan structures. Here are some components to keep in mind:

Scalable and adjustable

Your sales forecasting plan will need to grow with you, so be sure it has the space to be flexible. Feedback will be an important aspect of your forecasting plan, so also make sure to allow room for future improvements.

Data-driven

Data will be one of your most important tools when building, testing, reviewing and adjusting your sales forecasting plan. Invest in CRM software to streamline data content through automation.

Incorporates company goals and objectives

Your sales strategy will be based on the goals of your department and the company as a whole. Therefore, your forecasting plan should reflect those objectives (and be flexible when those goals shift as well!).

Collaborative

Since forecasting impacts the planning of budgets, risk management, and plenty of other business-wide decisions, gather insights from multiple teams when creating your plan. There should be cross-departmental visibility into your forecasting reports, so including their perspectives will be a helpful tool when creating your plan.

Don’t forget to reassess your forecast plan as often as possible — you want to scale it as the company grows, but also adjust accordingly when needed.

Knowing how to forecast sales is a vital component of leading your sales team. When creating a plan that is specific to your company, remember to integrate historical data, as well as sales metrics, market research, and cross-departmental insights to give you a well-rounded forecast framework.

By building your own forecasting plan, you are enhancing your sales team and helping them achieve greater results. A study by the Aberdeen Group found that companies with accurate sales forecasts had a 10% greater chance at growing their revenue year-over-year. Investing time into building a sales forecasting plan will set the foundation for a versatile and profitable sales organization.

Related Articles

How to Handle No Shows

How to Master Lead Qualification + 10 Common Pitfalls

How to Get Better Results from Your Discovery Calls

Ready to transform sales?

Aug. 30, 2024

Building your company’s first forecast model and why it’s important [w/ template]

Dan Kang, VP of finance

Whether you’re a founder or an early-stage finance lead, you’ll probably reach a point where you’ll want — or need — to build a forecast model. Maybe it’s because you’re fundraising and investors are asking for projections. After funding, your investors and board will likely ask what your intentions are for their invested cash. You might have partners or vendors who want to understand your business’s viability through projections. Or, perhaps, you just feel like you’re running blind without some way to see how today’s decisions impact the future state of your business, especially in relation to cash burn. A forecast model can help you align on clear business goals and understand why those goals matter.

What is a forecast model?

A forecast model is a structured approach to understanding your company’s possible future financial performance based on various assumptions and business drivers. It’s more than just a spreadsheet; it’s a dynamic tool that pieces together every aspect of your business — how you acquire and retain customers, generate revenue, allocate resources, and manage cash flow. It helps you understand the full scope of your company, ensuring that decisions are made with the broader business context in mind.

A good forecast model should start with breaking down how you win new customers, retain them, drive revenue from them, support them, build new products, resources needed to run the business, all the way through to what your cash flows and runway look like. Additionally for the finance lead, you’ll also want to understand what all of this means for your financial statements.

Why is a forecast model important?

When you’re busy building your product, figuring out product-market fit, and dealing with hiring decisions, a forecast model — especially at an early stage — can seem like a waste of time. After all, things change quickly, and it can feel counterproductive to invest too much time into a bunch of forward-looking projections. But while it might not feel like a top priority, a forecast model can be an extremely clarifying tool when done right. Here are a few of the ways it can benefit your business:

It enables better cash management

One of the primary benefits of a forecast model is its ability to help you manage your finances effectively, particularly in terms of cash flow and runway. A forecast model allows you to project your income and expenses over time, giving you a clear picture of your cash flow. This projection helps you identify potential cash shortfalls well in advance, enabling you to take proactive measures to address them.

By regularly updating your forecast with actual data, you can also keep track of how your runway is evolving and make informed decisions about when to raise additional funding or cut costs to extend your operational timeline. This is especially crucial if your startup is still in its earlier stages, since this is the time when cash burn rates can fluctuate significantly as you scale your operations.

It’s a useful resource for stakeholders and vendors

A well-prepared forecast model isn't just for internal use — it's also a great way to communicate with investors, board members, and other stakeholders. It shows that you’ve got a clear, data-driven plan for growth, which can boost investor confidence and keep your board updated on how you're tracking against your goals. Plus, it helps you prove your business's viability to partners and vendors, building trust and strong relationships. By giving everyone a transparent look at your company's future, a forecast model helps align everyone with your strategic objectives and supports your startup's success.

It helps with prioritization

Oftentimes in startups, you’ll be making a series of decisions at the micro-level without understanding what the downstream or tangential impacts are. You may decide to invest more in marketing because early tests are working well, hire AEs because your pipeline is building up, hire more engineers to build out your product roadmap sooner, or purchase software that’ll make your operations more scalable. All of these decisions may be the right call when made in isolation but it’s easy to miss how they compound when you have limited cash and resources to deploy. This can leave you short-changed for things that may have been higher priority investment areas, so a forecast model can help you think about your investments in the larger context of your whole business, ensuring smarter decisions for long-term success.

It helps you establish important baselines

A well-built forecast model helps you think about the key drivers of your business and the metrics you need to move in order to achieve the outcomes you want. It gives you a much clearer sense for what “good” looks like, and what goals you should be targeting. For example, if you’re operating in a novel software space, having a sense for what a good retention rate looks like might be tough without readily available benchmarks. But looking at how customer churn rates impact your revenue growth can provide clarity of how good they need to be for you to drive growth of certain levels.

What should you consider when building your financial model?

To make sure that you’re building out your financial model with all of the right things in mind, it’s important to consider a few key pointers:

Make sure you understand the drivers of your business

A good forecast model is grounded in a deep understanding of what drives your business. This means knowing how you acquire new customers, retain them, and generate revenue. It’s not just about crunching numbers — it’s about understanding the underlying realities those numbers represent.

Remember that the right level of granularity matters

Striking the right balance in the level of detail is crucial. Too much granularity, especially in the early stages, can be a waste of time as your business may change rapidly. However, as you grow, you’ll need to segment and cohort your forecasts to capture important trends that could impact your scalability.

Consider strategic vs. technical accuracy

While it’s important for your forecast to be technically accurate, it’s even more crucial that it helps you answer key strategic questions. A model that’s technically correct but fails to provide strategic insights is of little use.

Do some scenario planning

Forecasting is an exercise of contemplating the multiverse of possible paths forward and results (think Dr. Strange in Infinity Wars ). You want to contemplate the range of possible outcomes versus thinking of forecasting as having a single path for the future or trying to predict a single outcome. By considering a range of scenarios, you’ll be better prepared to navigate uncertainties and make informed decisions.

Here are a two examples that illustrate how having different scenarios can play different roles, depending on the situation:

• For fundraising, you may want to show a forecast that illustrates how you think about attacking your market and winning. The goal isn’t to simply show very large numbers, but to also show how you think about getting there from where you are today, regardless if you’re starting at pre-revenue or at $100M looking to hit your next milestone.
• For operating, you’ll want a more conservative set of numbers so that if your top-line revenue estimates don’t pan out exactly as planned, you’re not over-committed on headcount or expenses. You should regularly assess your confidence level for certain outcomes and make sure you’re appropriately investing in the right areas that’ll be most impactful for your business and increase that confidence level.

Mistakes to avoid when building your financial model

Just as there are important things to keep in mind that can guide your financial modeling, there are also a few mistakes you should be careful to watch out for. Here are a few of the don’ts to go along with the do’s:

Treating it like a spreadsheet exercise

A forecast model is more than just a collection of numbers in a spreadsheet. Each figure should reflect a real-life decision or operational factor. For example, the line item for R&D isn’t just about how much you’re spending on research and development; it’s about understanding whether you’re thoughtfully scaling up the engineering organization over time and allocating resources across product and other areas appropriately.

Predicting the future instead of setting goals

Your forecast should be a tool for setting and tracking goals, not a crystal ball for predicting the future. For example, rather than trying to guess your revenue in six months, use your forecast to set customer acquisition and retention targets that will help you achieve your desired revenue outcome.

Relying too much on “modeling math”

While mathematical models can be useful, they should not replace common sense. When forecasting expenses, for example, don’t just rely on percentage-based models, particularly at the early stage; think about what drives those expenses and how they align with your strategic priorities. This involves understanding who are the vendors used, why you use them, and how those costs scale. Assumptions like rolling averages and such certainly have a place in the model but be thoughtful about what the real-life implication of these types of assumptions may be.

Overcomplicating early models

In the early stages, avoid getting bogged down in unnecessary complexity. Focus on the big picture and build out more detailed models as your business grows.

Missing the strategic lens

A technically correct model that doesn’t help you answer key strategic questions is not impactful. Always ensure that your forecast is aligned with your broader business strategy.

[TEMPLATE] Building your model and tips to consider

Every business is different, which inherently means that every forecast model will look different. There are a few high-level categories within the model that will be relevant regardless of industry (e.g., customers, revenue, expenses), but the way those are broken out — as well as what additional information goes into the forecast — will vary company by company.

To help get you going, we’ve built a starter forecast model that you can leverage as a template. Our forecast model template is not intended to be taken as recommendations for how to operate. The model is populated with dummy data so you founders and finance leads can see how the full model works mechanically. It is by no means what an expected path looks like or how driver inputs should be assumed. 1 Access our template here .

While a decent portion of the model is designed to be business-agnostic, it’s designed to serve as an example of a fully functioning forecast model for a fictional software company. The idea is to use this as a foundation or set of building blocks for what your own company’s model will look like — you just have to make it your own.

Below, we outline a few of the core forecast model components that you’ll see in our template — we break down what they are, as well as how to update each element in the context of our provided template. The reference numbers in each section heading correspond with column B in the provided forecast model template for easy navigation. Keep in mind that in an effort to balance simplicity with usefulness, we’ve kept this list to the basics. There are plenty of other forecast components we haven't included, but you can always update to suit your needs. If you're a founder, the level of complexity in this model will probably feel stretchy already. If you're a finance lead, I'm sure you see lots of missing areas to include or expand upon.

Lastly before we jump into the forecast model, a note: forecast models don’t exist in a vacuum and should bridge both actual results and projections. This means that many of your model assumptions will depend on having solid actual numbers across both growth, customer, and financial data. Building the forecast model can also help you understand where data gaps exist today for your business. Work with your team and accountant if you have one to collaborate on the right data infrastructure to support this effort.

Here are the key sections and inputs you’ll see in this model. First, save a copy of the template, make sure you’re mindful of the access settings (or download as an Excel spreadsheet), and you should be good to edit and make your own.

Key metrics summary (Ref 3)

It’s always helpful to have a quick snapshot summary of your forecast up top so you can easily monitor how assumption changes drive different outcomes. When sharing your forecast with your investors, board, or internally, think about the right level of detail to surface. What’s shown in the template is meant to be illustrative; something that you can build upon for the most important metrics in your business.

New customers (Ref 4)

Think about how you’re acquiring new customers and what channels make sense for your target market. Channel mix and performance will look different if you’re selling to consumers vs. small businesses vs. enterprises. It will also look different based on the nature of your products. Keep assessing what’s working vs. not and test new channels and methods that make sense for your target customers. Customer acquisition costs typically get more expensive with scale and as competition increases so think through how you expect channels to scale and don’t depend on early data to always hold true. Also think about what you consider an “acquired customer.” If you have a lot of customer signups that don’t translate into active users, you probably want to measure “acquired customer” differently than a user account creation.

Using the template: The template shows a very simple way you can break down your new customer acquisition channels and what drives them:

• Performance marketing (Ref 5) (e.g. social media ads) where there’s strong ability to track direct results (versus brand marketing where it’s much more difficult to track the return on spend) is typically thought of in terms of spend, customer acquisition cost (CAC), and new customers (before you head into much more complex territory here). The marketing spend buckets can be populated down in the Expenses section (Ref 10). Then input a CAC to calculate the forecasted number of new customers from performance marketing. CAC may be volatile in the early periods and will also depend on your product, target market, seasonality, advertising creatives/copy, and competition. If available, benchmarks can be helpful here. Play around with different levels of CAC to better understand what level of spend efficiency is needed to meet your growth goals.
• Sales (Ref 6) may be a bigger growth channel if your product is selling to larger businesses. The sales funnel can be built out in much greater detail but ultimately is driven by productivity of your sales organization and how many customers they win. The Sales AE Headcount will auto-populate based on the employees/future hires who are tagged to the Sales team in the “People” tab of this template. From there, you’ll want to input what you think the productivity (deals won per Sales person) could be over time, taking into account what sales cycles may look like for your market and ramp periods.
• Organic (Ref 7) is notoriously difficult to forecast and attribution can become misleading even with the best tools and complicated frameworks. Some businesses see a relatively stable base of organic activity while others see very seasonal or volatile trends. Use your judgment here for what makes sense but err on the conservative side — just because you plan to spend a lot on brand marketing, that doesn’t mean you’ll see an immediate return. The impact of those dollars may take a long time to be realized, if at all. (This isn’t to diminish the value of brand marketing — the function is hugely important for a number of reasons, even if the ROI isn’t always super clear cut from a numbers perspective.) The template is set up as a hardcode but could be changed to assume some correlation to total marketing spend or as a percentage of total new customers as possible options. Make sure you do backtest whether the assumption methodology holds true though as you gain more data with subsequent periods of actual data.

You may have other channels not reflected here (e.g. partnerships, affiliates) but can probably use similar simple logic to start.

Customer retention (Ref 8)

Acquiring new customers doesn’t matter if you lose them quickly and don’t build a longer-lasting relationship with them. Take time to understand how your customers stick with your company over time and test various definitions of retention that provide an accurate measure of customer relationship. If you’re a monthly subscription business, this may just be whether the customer paid or not in a given period. If your business model is volume-driven, maybe the definition should be based on a certain activity (repeat purchases, for example). A popular, simple way you’ll see to model out retention and churn is to apply a simple monthly churn metric for the entire customer base, but this doesn’t factor in any real understanding of individual customer cohorts, their behaviors, and how they trend over time. Depending on the size of each cohort, improving/declining quality, and survivorship bias for that product, a monthly churn rate can drastically misrepresent what’s happening at a deeper level. Retention rates can also be very clarifying on whether you truly have product-market fit, whether you’re acquiring the right type of customer through your acquisition channels, and other product strategy questions.

Using the template: The template provides a simple way to use an assumed cohort retention curve (Ref 9) to model out how the cohort behavior translates to overall customer growth.

• The cohorts here are established based on the month customers were acquired. A different cohort definition may make sense for your business (e.g. first time taking a specific action). Before jumping into this forecast, do the data work to determine what the right measure of retention is for your business.
• As you input actual data (blue font in Ref 10) over time, the retention rates will auto-calculate down below (Reg 11).
• For non-actual periods for a given cohort, based on how many months it’s been since the cohort start, the formulas will apply the month-over-month change rate for a given cohort month to the prior month’s retention rate. This survival rate is used rather than pulling in the retention rate directly from the assumed curve (Ref 9) to account for variability in each cohort’s behavior to avoid unrealistic changes in their curves. For future cohorts, the retention rates will be exactly the same as the assumed curve.

Revenue (Ref 12)

Think about what type of customer activity is the direct driver of revenue and make sure you’re capturing trends there appropriately. In a B2B software business, it might be as simple as the customer agreeing to pay a certain price over a certain period of time. In other businesses, it may be tied to specific customer actions or activity. Really spend time understanding customer behavior and trends you see there. Talk to your customers to better understand why they behave the way they do.

Using the template: The template treats this very simply based on simple averages, which may work fine in the earlier stages of a business if average revenue per user (ARPU) is fixed or relatively stable.

• For subscription revenue (Ref 13), input the assumed average monthly price across your subscriber base. If your company is further along, you’ll likely want to further cohort and segment this portion of your model to account for things like price increases over time, shifts in customer profiles, etc.
• For activity-driven revenue (Ref 14), input the assumed average activity volume and the average take rate if applicable for your product. Similarly, this will likely require further cohorting and segmenting with scale.

Expenses (Ref 15)

A traditional income statement (known also as a P&L statement , for “profit and losses”) breaks down expenses in terms of: cost of goods sold (COGS), research and development (R&D), general and administrative expenses (G&A), and sales and marketing (S&M). Those groupings are helpful and should be part of how you understand your business, but it may be preferable to break out expenses in a way that you can very tangibly understand what exactly you’re spending money on (e.g. salaries, professional services, software, hosting, etc.). The simple way to think about forecasting expenses is to think about your own personal finances and how you manage a budget. Table out what you plan to spend across different expense categories, who exactly you’re paying, how contracts with existing vendors work, and what money you’re setting aside for future spending needs.

Oftentimes folks will model these out using “modeling math,” like using “% of revenue” methods, for example. This makes sense when you’re analyzing companies and don’t have the actual control to influence the decisions. But in this situation, you do control the decisions, so set budgets that reflect your strategic priorities and hold your teams accountable to them. A lot changes in a startup even over the course of a quarter, but by having a clear number to start, you’ll understand how changes over time keep you on (or take you off) course, particularly in regards to cash burn. This can help you make the right trade-off decisions.

An important thing to keep in mind when it comes to expenses is that, for most startups, people-related expenses will be your largest area of spend — and this will need to factor into your forecast as well. Getting this wrong can lead to difficult spirals of layoffs, negative press, low employee morale, etc. From the early days, develop the muscle of prioritizing hires over the next few months and regularly assessing with your team where the needs are and why. Formalize these into hiring plans with market-informed assumptions on compensation so you’re not surprised by how quickly people related expenses build up.

Using the template: The template breaks out in the Expenses section a simple way to build out your budgets for each of the expense categories. If you have unique expenses not captured here, spend time thinking about which of your expenses are inputs vs. outputs. Inputs are the ones you have control over spending (e.g. marketing spend) whereas outputs are the ones that are the result of another item (e.g. payroll taxes driven by headcount and salaries paid).

• For software companies, hosting services may be the main cost here. For an ecommerce company, inventory will likely be the main cost. For services, the cost of the team delivering the service.
• Note that in a traditional GAAP income statement, personnel expenses related to customer support is typically included in COGS. This income statement is meant more for internal operating purposes vs. external reporting where GAAP treatment of financials can be more important depending on the audience.
• Understanding COGS is important to understand your business’s gross margins, and the first step in assessing scalability over time. High margins can mean more cash flow to help fund additional hiring or growth investments, while low margins mean you’ll need to focus on driving high volume to build a scalable business. (This isn’t necessarily a bad thing — it may be the nature of the industry you play in.)
• Marketing spend (Ref 17) can be inputted based on the investment decisions you’ve made. Remember, you typically have control over what you spend so build a marketing plan that thoughtfully considers the best way to allocate spend here. The performance marketing budget will drive new customer acquisition as mentioned above. Brand Marketing and Events & Conferences do not impact new customers and growth as modeled here — you may find that for your business there is a more defensible connection, and these should in fact be treated as drivers.
• The “People” tab will auto-populate the Salaries portion of the forecast model based on the Salary and Start Date information. The Start Month will auto-populate based on the Start Date and capture those roles in the Salaries portion. The headcount number in the Key Metrics Summary will also update based on the inputs here.
• If an employee is terminated, keep them in the list and enter the Termination Date. This will auto-populate the Termination Month and subtract the terminated role's salary from the Salaries portion of the model if upcoming.
• If your company has a sales motion, headcount noted as "Sales" in the Team column of the “People” tab will auto-populate the Sales AE Headcount row. (Note that the tag in the Team column will need to match this exactly, or you’ll need to update the related formula in the model to reflect the corresponding tag you wish to use for sales headcount in the “People” tab.)
• Remember, the roles in the template are made up roles populated for the sake of exhibiting how the forecast model works. This is not intended to be a recommendation on compensation levels, scaling, or sequencing of hires.
• Payroll tax, benefits, travel & meals expenses are outputs based on hiring and salaries. Input their assumptions to populate these expenses.
• Non-personnel expenses (Ref 19) can be a mix of inputs and outputs. Rent & office expenses are usually fixed based on a lease schedule, whereas professional services have a level of discretion to them like marketing spend. Software expenses can grow large if not monitored and, depending on your vendors, can scale directly with employees or indirectly with customers or other operations (for example, if you need to pay more for additional seats with particular tools).

Financial statements (Ref 20, 25, 28)

If you’re a founder this might feel intimidating, but it doesn’t have to be. Understand how the various items roll up into your P&L and how your balance sheet items and cash balance change over time. As an early-stage company, you may still be performing cash accounting and not GAAP accounting (aka accrual-based accounting ) and hence won’t have many balance sheet items. When you bring on an outsourced accountant, part-time CFO, or your first finance hire , make the investment to make the switch as a better way to understand the truths of your business. If you’re a founder, there may be balance sheet concepts that are new (e.g. net working capital) that may be valuable to manage your business and cash runway that may not be appreciated when only looking at your P&L. Tracking how your cash balance trends month over month in the forecasted period is really the best way to understand your cash runway. (Simply dividing your cash balance by last month’s change in cash balance or EBITDA doesn’t reflect how you expect your business to change over time.)

Using the template: The template provides a forecast for all three key financial statements (income statement, balance sheet, and cash flow statement). The financial statements are mostly automated and really a result of the work you did for the above sections but there are items that’ll need some ancillary assumptions to work. That said, you should still take time to really understand your company’s financial statement. They’ll ultimately be the measuring stick for how your business is doing beyond the early phases, cutting through the hype of vanity metrics.

• If you’re working with an accountant to properly capitalize fixed assets, you’ll likely have Depreciation & Amortization (Ref 21) to expense them over time. If your business is heavily capital-intensive (e.g. need to invest a lot of cash upfront for buildout of servers or buildings, for example), getting this right will be important to understand your cashflow dynamics. If you’re not working with an accountant for GAAP accounting or you’re not running a capital-intensive business, you mayyou’ll be fine ignoring this in the early days.
• Stock-based compensation is a real thing, even if non-cash and associated with giving employees equity awards. In the early days, you can ignore this, but it’s included in the template here for more mature companies that have started to record this.
• Interest expense and income are related to what you pay on any debt and yield on invested cash, respectively. Input the associated annual rates in the assumption rows (Ref 23) and these items will calculate based on the outstanding debt and treasury balances.
• Taxes, if profitable, can be calculated in the template using a simple effective tax rate assumption. Consult with a tax advisor to better understand your tax situation though as this may be too simplistic for your business. There’s a lot of complexity here around how expenses are treated for tax deduction purposes, which tax credits you may be eligible for, and the possible usage of prior net operating losses (NOLs) to offset tax liabilities.
• Working capital items (Accounts Receivable, Prepaid Expenses, Credit Cards, Accounts Payable, Accrued Expenses shown in the template) (Ref 26) can be easily forecasted based on ratios that tie those balances to the underlying activity that causes them.
• Fixed Assets (Ref 26) reflect long term assets that the company has purchased. Rather than treating these expenditures as expenses through the P&L, GAAP capitalizes them based on a capitalization policy (puts them on the balance sheet vs. income statement) and recognizes their expenses over their useful life. As noted above on Depreciation & Amortization, your business may be too early to spend meaningful time here. If you’re a finance lead, you’ll want to build a fixed asset schedule to properly forecast for these.
• Venture debt (may be other forms of debt too) (Ref 27) is populated based on the debt drawdowns (not available credit which isn’t reflected in a balance sheet) captured in the Cash Flow Statement. Equity (Ref 27) is populated based on equity proceeds captured also in the Cash Flow Statement.
• Make sure your balance sheet actually balances (Total Assets = Total Liabilities + Total Equity). If not, something is broken in the forecast model.
• If you’re not at the point of having a more detailed balance sheet per GAAP, don’t worry — you can still use this template easily. Just zero out the working capital items (Ref 26) and the Assumptions associated with them other than your credit card balance which you can track and record.
• Cash from Operating Activities: removes the impact of working capital changes (Ref 26) and non-cash expenses (Ref 21 and 22) to measure how much cash came from your business’s core operations. This section is fully auto-populated.
• Cash from Investing Activities: the term “investing” is from the company’s perspective where capital is used for long term assets (capital expenditures or capex) and ties into the Fixed Assets and Depreciation & Amortization lines discussed above (Ref 21).
• Cash from Financing Activities: this is where you reflect cash coming into the business from debt proceeds (convertible note, venture debt, working capital line, SMB loan, etc.) and equity proceeds from investors.
• Based on the above, your change in cash and ending cash balance is calculated for the forecast periods.

As you digest this and begin putting it into practice, remember to make the template forecast model your own. Again, there are lots of derivative metrics that you can add which have been excluded in the spirit of keeping this as simple as possible. Spreadsheets are always flexible so play around with things and remember to always ground the forecast in your business and how you think about the strategic priorities for the company.

For the non-finance folks who are adventuring into the world of financial forecasts and may not be at home in spreadsheets, don’t be intimidated. Just remind yourself that spreadsheets are much easier than writing engineering code or people management which you’re probably doing as a non-finance founder.

And most importantly, remember to use the forecast model as a living, breathing management tool for your company. Update it after each month with actuals, understand how you’re performing to the forecast and why, and use it to uplevel your own command of your business.

Tyumen Precipitation: Average Monthly Rainfall and Snowfall

This graph shows the average amount of rainfall per month in Tyumen (Tyumen Oblast). The numbers are calculated over a 30-year period to provide a reliable average.

• Tyumen has dry periods in January and February.
• On average, July is the wettest month with 83 mm of precipitation.
• On average, February is the driest month with 22 mm of precipitation.
• The average amount of annual precipitation is 546 mm .

Current rainfall in Tyumen

broken clouds and no rain

broken clouds and rain

broken clouds and slight rain

Interested in more climate information?

This site provides you with all the information you need about the climate in Tyumen .

Our site offers climate and forecast data for every country in the world. Are you going to Russia ? On this website you can find historical weather averages for many cities in Russia . Not sure yet where to go? We now have a tool which recommends destinations that suit your ideal travel conditions. Find out where to go with our weather planner .

Travel Inspiration

Be amazed by the Altai mountains

The Atlai mountains are a sparsely populated area that most tourists have not yet discovered. Definitely bucket list material for the adventurous travelers among us.

Visit the Kamchatka Peninsula

One of the most enchanting areas of Russia is the Kamchatka peninsula. It is how the earth must have looked like in prehistoric times.

The 10 most charming villages in France

Discover France's top 10 beautiful villages. From Normandy to the Côte d'Azur, experience quaint squares and cobbled streets. Which one will you visit this summer?

What to do in Lisbon: our tips for an unforgettable city trip

Lisbon is a bustling city with many special places. In this article you find the best sights, good restaurants and nice places to stay in Lisbon.

Tyumen, TYU, RU Current Weather

+10° 50°

Feels like +10° 50°

1 m/s 2 mph 4 kmh 1 Bft

Gust 6 m/s 13 mph 22 kmh 4 Bft

0 mm 0 in Rain

73 % Rel. hum.

1026 hPa 30.3 inHg 769.7 mmHg Pressure

5 Day Forecast

Max +15° 59°

Min +9° 48°

Max +21° 70°

Min +8° 46°

Max +14° 57°

Max +12° 54°

Min +7° 45°

Max +13° 55°

Precipitation

Weather for the week, last visited, your favorites, nearest observations.

Dewpoint 6° 43°

Rel. hum. 81 %

Feels like +9° 48°

Pressure 1028 hPa 30.3 inHg 770.8 mmHg

Visibility 20000 m 12 mi

Roschino International Airport

Rel. hum. 76 %

Feels like +8° 46°

Pressure 1027 hPa 30.3 inHg 770.3 mmHg

Visibility 9999 m 6 mi

29 minutes ago

Jalturovosk

Dewpoint 5° 41°

Rel. hum. 71 %

Feels like +11° 52°

Pressure 1028 hPa 30.4 inHg 771 mmHg

Visibility 50000 m 31 mi

Nearest observations show current weather observations from your nearest weather stations.