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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.

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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.

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• 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

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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

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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.

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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)

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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

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How to create a sales forecast for your small business

May 21, 2024 | 7 minute read

What you know about tomorrow can help you make better decisions about running your small business today. A sales forecast can be a helpful tool in estimating future sales, so you can take that information into account in your planning. Simply put, a sales forecast estimates the quantity of goods and services you can reasonably expect to sell over a specified period, the cost of those goods and services and the potential profit. It’s based on your sales in the past, industry benchmarks and market conditions. 

A sales forecast is an invaluable tool for better  managing your cash flow , spending, staffing and more. Once you complete your forecast, you’ll have a better sense of what’s driving your revenues and profits, know where to put your time and resources and be able to identify efforts that are not fueling growth so you can consider eliminating them. 

Why sales forecasting is important

A sales forecast helps you understand your financial position. It can be a good starting point for setting goals and provides guidance in many areas of your business, such as planning for new hires, purchasing inventory and equipment, knowing when to preserve cash, increasing your marketing budget or alerting you that you need to find new  ways to make more money . It can also help you illustrate your business’s potential to investors.

What factors impact a sales forecast?

A forecast is really an educated guess. There are any number of conditions that might shake up your projections, such as new laws and regulations. A downturn in the economy could mean a change in business conditions, making it harder to get credit. A dip in consumer confidence could lead to less spending on your company’s goods and services. New competition in your market, a drop in customer satisfaction or extreme weather (a major storm that essentially shuts down a city for a few days, for example) could all make a difference in what you thought was going to happen. Something like seasonality can also impact your forecast. Internal factors like new production processes and procedures can also keep you from hitting your target. 

Sales forecasting methods

There are several methods to creating a sales forecast. Here are three that many small businesses use:

Historical forecasts

This method is based on your business’s past performance. If you’ve been in business for a year or more, you can look back at data by the week, month, quarter or year. If you’ve launched your business recently, this option won’t work well because you won’t have enough data available. 

Bottom-up forecasts

To come up with these forecasts, you must project the number of units you will sell, then multiply that figure by the average cost per unit. If you run a larger small business, you can also include metrics like the number of locations, sales representatives or online interactions. The rationale behind a bottom-up sales forecast is to begin with the smallest components of the forecast and build up from there. The advantage of this type of forecast is that if any variables change (like cost per item or number of reps), the forecast is easy to adjust. 

Top-down sales forecasts

Start with the total size of the market and estimate what percentage of the market the business can capture. If the size of a market is $20 million, for example, a company may estimate it can win 10% of that market, making its sales forecast $2 million for the year. If you’re a natural optimist, it’s a good idea to ask an advisor to provide a reality check on the percentage of customers in your market that you can reasonably expect to attract and serve so that your projections are more accurate. 

How to create a sales forecast

Once you’ve selected a sales forecasting method, you’ll want to take several steps.

1. List the goods and services you sell

In a sales forecast, you’ll want to account for each product or service that you are selling so your forecast is accurate. 

2. Quantify your sales

Each sales forecasting method has its own way of estimating future sales: 

In  historical forecasting , you will need to project the quantity of each product or service you will sell and multiply the unit price by that number. In this type of forecasting, you can base your estimate on the sales figure you brought in last month as long as nothing major has changed in the marketplace. So, if you sold $50,000 worth of your product in July, you might estimate selling $50,000 worth in August. 

In  bottom-up forecasts , you must first estimate the total number of orders that customers will place for your products or services through your website, social media channels and other places you make sales. Then you estimate the average price minus any discounts you offer. Finally, you must multiply the estimated number of orders for each item by the average price to get estimated revenue. 

In  top-down forecasts , you start by estimating the total market for each item you sell. For example, if you were lucky enough to capture 100% of the sales, how much would you have sold? Then project how much of that market you can realistically capture. So, for instance, if the total addressable market for what you sell is $1 million, and you capture 7% of that with your product, your estimated sales will be $70,000. 

3. Make adjustments

Some owners adjust their forecasts to reflect projected market conditions, regulatory changes, new marketing efforts and other variables.

4. Subtract costs

Business owners will typically subtract the costs of creating each good or service they sell from their estimated sales forecast to understand how much profit would be generated from sales. Let’s say you sell a backyard game you invented by outsourcing the manufacturing to a local factory. You might subtract  overhead expenses , such as paying the factory and buying materials, from your projected revenue to anticipate how much money would be left over as profit. Or if you run a social media agency that has taken on new clients who’ve hired you on retainer, you might subtract costs, such as paying freelancers to write social media posts and subscribing to a website that provides stock photos, to get a clearer picture of future profits. 

Tools for sales forecasting

If you haven’t done so already, you might want to consider software to help with sales forecasting. 

Sales forecasting software

Sales forecasting software can use historical business data and trends to create a report of expected sales revenue. Forecast reports can compare sales targets with actual sales. 

Ideally, sales software can help you answer questions like: 

What is your expected revenue? 

Which forecasting method produces the most accurate forecast for your business? 

How did actual sales compare with expected sales?

Sales pipeline forecasting software

With sales pipeline forecasting software, you’ll get an analysis of existing opportunities and a calculation of your success rate in pursuing them, helping you prioritize your efforts. This method focuses on pipeline management and calculates a historical win-rate percentage based on the value and age of the opportunity and the sales representative working on it. Some software programs include features that will give you the ability to view pipeline activity and internal sales data or save you time, letting you integrate information from third-party sales software, for instance. You can create sales forecasts using software such as QuickBooks, Salesforce Sales Cloud, Zoho CRM and Pipedrive.

Historical sales forecasting software

Historical sales forecasting software analyzes previous company performance to calculate a mean (or average) sales level you can expect for the following month, quarter or year. It emphasizes historical trends and seasonality of products and services sold, but it does not consider the opportunities in your pipeline. This software is ideal for small businesses that don’t have big swings in their monthly sales. 

Bottom line

Your sales forecast can be a vital tool as you make plans to grow your business or adjust to challenges. By comparing your actual performance to your forecasts, you’ll be able to get a clear handle on your success and failures, fine-tune your strategies and capitalize on what is working for you so you can keep your business moving to the next level. 

Explore more

Cash flow management basics for small businesses

How to write an effective business plan

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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

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3 Popular Sales Forecast Examples For Small Businesses

• October 9, 2022
• Small Businesses

When creating financial forecasts for their business, entrepreneurs often face difficulties. Yet, there are 3 popular sales forecast examples you can use when creating yours. They work for the most popular revenue models , from restaurants, to retail shops, to software companies and other online businesses.

If you aren’t sure what are sales forecasts, read our article and follow these 5 simple steps to create accurate sales forecasts for your business. Looking for examples instead? In this article we explain what are the most popular 3 sales forecast examples for (almost) any type of business. Let’s dive in.

What is a sales forecast?

A sales forecast is the financial projection of a business’ sales (or revenues, turnover) over a given period. Therefore, sales forecasts are a must have of any financial forecast: by projecting sales and expenses we can then prepare the  4 financial statements  which constitute a financial forecast.

Often, sales forecasts are included within a business plan as part of your projected financial statements. Indeed, investors will want to see your business’ financial projections over a given period. Sales forecasts often are  3 or 5-years projections .

For more information on sales forecasts for small businesses and why they are important, read our article here .

Let’s now dive into the 3 most popular sales forecast examples which work for any type of business, from restaurants, to retail shops, to software companies and other online businesses.

Why are sales forecasts important?

Because sales forecasts are part of your financial forecasts, and ultimately your business plan, it is very important to get it right.

Sales forecasts help you set goals for your business

Sales forecasts aren’t simply a requirement for your business plan. Instead, they also help you set goals for your business. The sales you expect to generate as per your sales forecast should be used as a guidance for your budget and your business decisions later on.

You show you understand your business

Showing investors you’re not only a great entrepreneur but also a well-rounded and omniscient founder is very important to get the best deal. A great sales forecast will help understand how your business generates revenues, what are the different drivers affecting revenue and the potential risks involved.

Investors will give more credit to financial plans based on verified assumptions and reasonable targets. Calculate expected revenue using market size , market share and/or user adoption rates for instance. The more you justify your plan with verified assumptions, the more credible it will be.

You know how much you need to raise

Many entrepreneurs and founders do not really know exactly how much they need to raise.

Sales also drive expenses, so forecasting sales plays a pretty important role when assessing things such as your breakeven or the amount of money you need to raise . Miss the mark and you may be in trouble.

How much cash do you need to cover your losses over the next 12-18 months? The amount of money you need to raise is the result of your financial projections. This is very important to accurately estimate your revenues and expenses.

How to do a sales forecast?

Before we dive into the specifics of creating a rock-solid sales forecast for your small business, let’s first explain which approach you should follow.

Many entrepreneurs make the same mistake when forecasting their sales: they use a top-down approach. So what is bottom-up and top-down sales forecasting? Let’s use an example below.

• Top-down sales forecasting : we forecast sales using from the top down. For example, you make $500k in revenue per year and you forecast the next 3 years revenue by assuming you will capture 3% of your market size (assuming it is $100 million). By following this approach, your annual revenue is 3 years time is $3 million, a 6x increase from today.
• Bottom-up sales forecasting : we forecast sales using operational drivers (from the bottom up). For example, if your $500k sales are a function of your website traffic, we will forecast revenues based on this metric instead. Assuming website traffic increase by 50% each year (as you invest in paid and content), your revenue in 3 years time is $1.7 million, a 3x increase from today.

Bottom-up sales forecasting is the best approach for 2 main reasons:

• It allows us to relate revenues to another metric, helping us making sense of the projection. Does $3 million really make sense given this would mean multiplying website traffic by 6x over the next 3 years?
• Top-down approach requires us to make assumptions on the market size, which is often inaccurate for lack of publicly available data. Instead, bottom-up uses your own business’ historical data

Sales forecasts: 3 popular examples

1. location-based businesses.

If you are running a businesses with a physical location, such as a hotel, a restaurant, a repair shop or a retail store for example, forecasting sales boils down to forecasting street traffic.

Indeed, sales (revenues) are a function of the sales volume you generate (the number of “units” or products you sell). The sales volume itself is a function of the number of people who enter your store, and, by extrapolation, the number of people who pass by your store.

When forecasting sales for a new business, you should look at the location where your business will be based first. Assess the approximate number of people who are passing by.

Note: when assessing traffic, be careful to exclude any external factors (e.g. Christmas day), cyclicality and seasonality. Ideally, your assessment should look at a full week and all work hours in the day.

Once we have established the approximate number of people who pass by the street in a day, we will need to apply conversion rates, in order:

• How many people enter the store?
• Out of the people who enter the store, how many make a purchase?

Of course, if you already have some historical data (if you already run a store and are opening a new one), use your existing conversion rates. Else, make assumptions.

When making assumptions, you should use the data you have collected when making your own observations earlier. Use similar stores to yours, in a different street for example.

For example:

• 5% of people passing by your store enter
• 10% of people entering the store make a purchase

We can now create a simple sales forecast over a week, adding up the average traffic over a typical week:

2. Online businesses

Online businesses often acquire their customers via their website, or any type of online presence.

As such, unlike location-based businesses, sales (revenues) are a function of visitors (and not street traffic). The visitors can be visitors on a website, on a Appstore page (mobile apps) or any type of online lead acquisition page.

We often refer this type of acquisition as inbound acquisition . The traffic is two fold: paid and organic:

• Paid traffic : all visitors coming from paid marketing channels (Google Search, Facebook Ads, etc.). You are either paying for clicks, or impressions. 
• Organic traffic : all visitors landing on your landing page(s) organically (either via a referral link, direct search, social media post, blog article, etc.)

Paid marketing is the easiest way to generate traffic. Yet, because you are paying for each paid visitor, you will need to monitor your  Return on Ad Spend (ROAS)  to make sure your paid marketing campaigns are profitable.

In comparison, whilst you do not directly pay for each organic visitor, organic traffic is not free. Organic traffic is earned from investment into  SEO  and content. Whilst investing into your SEO for instance does not pay immediately, the returns can far outweigh those of your paid marketing in the long run.

So, when forecasting sales for online businesses, we should make assumptions on traffic. For example assuming:

• 30,000 visitors last month: 20,000 paid and 10,000 organic
• 3% monthly increase
• 2% conversion rate
• $50 average purchase price

This is how could look like a simplified sales forecast example for an online business:

3. Lead-acquisition businesses

Lead-acquisition businesses are companies that make sales through their sales teams efforts. This is also known as outbound acquisition (vs. inbound discussed above).

With outbound acquisition, a business acquires customers through its sales team. Whether it is via phone, email, Linkedin or even in-person, the number of acquired customers is a function of the number of sales people.

Outbound acquisition is very common for business-to-business (B2B) companies. For example, Enterprise SaaS and B2B marketplaces use outbound acquisition to acquire their customers.

Outbound customer acquisition is therefore easier to forecast vs. inbound. The simple formula to estimate new customers over time is:

The number of closings per sales person is also referred to as the efficiency of your sales team = the number of customer one sales person acquire (or “close”) each month, in average.

For example, lets’ assume you have 20 sales people. Historically, your sales team has closed (“acquired”) in average 2 B2B clients per month per sales person. Assuming you have the same number of sales persons and the same sales efficiency in the future, we can reasonably expect 40 new customers per month.

Now, assuming 1 new hire every 2 months, a sales forecast example for a lead-acquisition business could look like this:

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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.

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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.

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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.

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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.

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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 .

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Home » Business » Free Sales Forecast Template (Word, Excel, PDF)

Free Sales Forecast Template (Word, Excel, PDF)

A sales forecast template (Word, Excel, PDF) is used by the sales teams and maybe the marketing or sales managers to make projections of the sales of different things, products, or items you purchase. A sales projection is a fundamental piece of a marketable strategy. It is additionally basic in the event that you are hoping to get a bank advance or financial specialists.

The sales forecast template gives you a chance to break down and conjecture the unit deals, development rate, net revenue, and gross benefit for your items and administrations. It gives a speedy beginning stage to set up your business estimate and incorporates some specimen diagrams. You may also like hold harmless agreement template .

Anticipating sales of your item or administration is the beginning stage for the money related projections. The business gauge is the way to the entire money related arrangement, so it is imperative to utilize practical appraisals. Partition your anticipated month to month deals into “Classifications”, which are common divisions that bode well for your sort of business. Run of the mill classifications may be product offerings, divisions, branch areas, client gatherings, topographical domains, or contracts.

To concealment of many centers without a moment’s delay, there are different sales templates available online all of which can be downloaded for nothing. Notwithstanding a business activity design format, you’ll discover a pipe layout to help imagine the business procedure, a business gauge layout for making projections, deals tracker, and report layouts for gathering imperative information, a pipeline for following contacts, and that’s only the tip of the iceberg. We’ve likewise included deals with email formats to improve correspondence with leads. You should also check the expense report template .

Utilizing a business format gives simple association and productivity, authorizing assets, and time that can be utilized toward achieving business objectives. A format can likewise be a compelling specialized instrument for deals and promoting groups when creating and progressing in the direction of offers targets. Contingent upon the nature and extent of your business, a few formats can likewise be incorporated as a feature of a compelling strategy for success. You may also see the business plan template .

Table of Contents

Benefits of Using Sales Forecast Template:

• You can track your item by item budget.
• You can forecast or project your sales of different items in different periods.
• You can compare the projections with the actual ones.
• Customize able
• Easy to use.
• Enhanced decision making

12 Month (One Year/1 year) Sales Forecast Template Excel

Weekly Sales Forecast Template

Monthly Sales Forecast Template Word

Strategic Sales Forecast Spreadsheet

3 Month Sales Forecast Template

3 Year Sales Projection Template

Business Plan Sales Forecast Template

Sales Forecast Example Business Plan

Sales Forecast Excel Template

Sales Forecast Template Excel Free

Sales Forecast Template for Startup Business

Sales Projection Template Excel

Sales Revenue Forecast Template

Additional Reading: How to Do a Sales Forecast? ( link )

How To Use Sales Forecast Template?

These format templates enable you to design your business objectives with the adaptability and usefulness of an Excel spreadsheet. This business design format is isolated into a year and separate product offerings.

Sections are incorporated for the earlier year’s execution, current deals objectives, and results. Make the design of a yearly deal, and think about information after some time and crosswise over items.

In conclusion, these sales forecast templates are very useful and efficient for the sales managers and the marketing teams.

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I am Ryan Duffy and legal writer. I received a bachelor of business administration (BBA) degree from London Business School. I have 8+ years of writing experience in the different template fields and working with ExcelTMP.com for 7 years. I work with a team of writers and business and legal professionals to provide you with the best templates.

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Here is a free business plan sample for a fruit and vegetable store.

Have you ever envisioned owning a bustling fruit and vegetable market that serves as a cornerstone of health in your community? Wondering where to start?

Look no further, as we're about to guide you through a comprehensive business plan tailored for a fruit and vegetable market.

Creating a solid business plan is crucial for any aspiring entrepreneur. It serves as a roadmap, outlining your vision, objectives, and the strategies you'll employ to turn your fresh produce venture into a thriving business.

To jumpstart your planning process with ease and precision, feel free to utilize our fruit and vegetable market business plan template. Our team of experts is also on standby to provide a free review and fine-tuning of your plan.

How to draft a great business plan for your fruit and vegetable store?

A good business plan for a fruit and vegetable market must cater to the unique aspects of this type of retail business.

Initially, it's crucial to provide a comprehensive overview of the market landscape. This includes up-to-date statistics and an exploration of emerging trends within the industry, similar to what we've incorporated in our fruit and vegetable market business plan template .

Your business plan should articulate your vision clearly. Define your target demographic (such as local residents, restaurants, or health-conscious consumers) and establish your market's distinctive features (like offering organic produce, exotic fruits, or locally-sourced vegetables).

Market analysis is the next critical component. This requires a thorough examination of local competitors, market dynamics, and consumer buying patterns.

For a fruit and vegetable market, it's imperative to detail the range of products you intend to sell. Describe your selection of fruits, vegetables, herbs, and any additional items you plan to offer, and discuss how these choices align with the preferences and needs of your customer base.

The operational plan is equally important. It should outline the location of your market, the layout of the retail space, your supply chain for fresh produce, and inventory management practices.

Given the nature of a fruit and vegetable market, it is vital to highlight the freshness and quality of your produce, your relationships with growers and suppliers, and adherence to health and safety standards.

Then, delve into your marketing and sales strategies. How do you plan to attract and keep customers coming back? Consider your approach to promotions, customer loyalty programs, and potential value-added services (like home delivery or a juice bar).

Incorporating digital strategies, such as an online ordering system or a robust social media presence, is also crucial in the modern marketplace.

The financial section is another cornerstone of your business plan. It should encompass the initial investment, projected sales, operating expenses, and the point at which you expect to break even.

With a fruit and vegetable market, managing waste and understanding the shelf life of products are critical, so precise planning and knowledge of your financials are essential. For assistance, consider using our financial forecast for a fruit and vegetable market .

Compared to other business plans, a fruit and vegetable market plan must pay closer attention to the perishability of inventory, the importance of a robust supply chain, and the potential for seasonal fluctuations.

A well-crafted business plan not only helps you to define your strategies and vision but also plays a pivotal role in attracting investors or securing loans.

Lenders and investors are keen on a solid market analysis, realistic financial projections, and a comprehensive understanding of the day-to-day operations of a fruit and vegetable market.

By presenting a thorough and substantiated plan, you showcase your dedication and readiness for the success of your venture.

To achieve these goals while saving time, you are welcome to fill out our fruit and vegetable market business plan template .

A free example of business plan for a fruit and vegetable store

Here, we will provide a concise and illustrative example of a business plan for a specific project.

This example aims to provide an overview of the essential components of a business plan. It is important to note that this version is only a summary. As it stands, this business plan is not sufficiently developed to support a profitability strategy or convince a bank to provide financing.

To be effective, the business plan should be significantly more detailed, including up-to-date market data, more persuasive arguments, a thorough market study, a three-year action plan, as well as detailed financial tables such as a projected income statement, projected balance sheet, cash flow budget, and break-even analysis.

All these elements have been thoroughly included by our experts in the business plan template they have designed for a fruit and vegetable market .

Here, we will follow the same structure as in our business plan template.

Market Opportunity

Market data and figures.

The fruit and vegetable market is an essential and robust component of the global food industry.

Recent estimates value the global fruit and vegetable trade at over 1 trillion dollars, with expectations for continued growth as consumers seek healthier eating options. In the United States, the fruit and vegetable industry contributes significantly to the economy, with thousands of markets and stores providing a wide range of produce to meet consumer demand.

These statistics underscore the critical role that fruit and vegetable markets play in not only providing nutritious food options but also in supporting local agriculture and economies.

Current trends in the fruit and vegetable industry indicate a shift towards organic and locally sourced produce, as consumers become more health-conscious and environmentally aware.

There is an increasing demand for organic fruits and vegetables, driven by the perception of better quality and concerns about pesticides and other chemicals. The local food movement is also gaining momentum, with consumers showing a preference for produce that is grown locally to support community farmers and reduce carbon emissions associated with transportation.

Technological advancements are influencing the industry as well, with innovations in vertical farming and hydroponics allowing for more sustainable and space-efficient growing methods.

Online grocery shopping and delivery services are expanding, making it easier for consumers to access fresh produce directly from their homes.

Additionally, the push for transparency in food sourcing continues to grow, with consumers wanting to know more about where their food comes from and how it is grown.

These trends are shaping the future of the fruit and vegetable market, as businesses strive to meet the evolving preferences and values of modern consumers.

Success Factors

Several key factors contribute to the success of a fruit and vegetable market.

Quality and freshness of produce are paramount. Markets that offer a wide variety of fresh, high-quality fruits and vegetables are more likely to build and maintain a dedicated customer base.

Diversity in product offerings, including exotic or hard-to-find produce, can differentiate a market from its competitors.

Location is also vital, as markets that are easily accessible to consumers will naturally attract more foot traffic.

Customer service is another important aspect, with knowledgeable and friendly staff enhancing the shopping experience and encouraging repeat visits.

Effective cost management and the ability to adapt to changing consumer trends, such as the demand for organic and locally grown produce, are crucial for the long-term viability of a fruit and vegetable market.

The Project

Project presentation.

Our fruit and vegetable market project is designed to cater to the increasing consumer demand for fresh, organic, and locally-sourced produce. Situated in a community-focused neighborhood, our market will offer a diverse selection of fruits and vegetables, emphasizing seasonal and organic options. We will partner with local farmers and suppliers to ensure that our customers have access to the freshest produce available, supporting sustainable agricultural practices and reducing our carbon footprint.

We aim to provide not just produce, but a holistic healthy eating experience by offering a range of complementary products such as herbs, spices, and artisanal condiments. Our market will be a hub for health-conscious consumers and those interested in cooking with the finest ingredients.

Our fruit and vegetable market is set to become a cornerstone in the community, promoting healthier lifestyles and fostering connections between local producers and consumers.

Value Proposition

The value proposition of our fruit and vegetable market lies in our commitment to providing the community with the highest quality fresh produce. We understand the importance of nutrition and the role that fruits and vegetables play in maintaining a healthy diet.

Our market will offer a unique shopping experience where customers can enjoy a wide variety of produce, learn about the benefits of incorporating more fruits and vegetables into their diets, and discover new and exotic varieties. We are dedicated to creating a welcoming environment where everyone can find something to enrich their meals and support their well-being.

By focusing on local and organic sourcing, we also contribute to the sustainability of our food systems and the prosperity of local farmers, aligning our business with the values of environmental stewardship and community support.

Project Owner

The project owner is an individual with a profound passion for healthy living and community engagement. With a background in agricultural studies and experience in the food retail industry, they are well-equipped to establish a market that prioritizes quality and freshness.

They bring a wealth of knowledge about the seasonality and sourcing of produce, and are committed to creating a marketplace that reflects the diversity and richness of nature's offerings. Their dedication to health, nutrition, and sustainability drives them to build a market that not only sells fruits and vegetables but also educates and inspires the community to embrace a healthier, more sustainable lifestyle.

Their vision is to create a space where the joy of fresh, wholesome food is accessible to all, and where the market serves as a vibrant gathering place for people to connect with their food and each other.

The Market Study

Market segments.

The market segments for this fruit and vegetable market are diverse and cater to a wide range of consumers.

Firstly, there are health-conscious individuals who prioritize fresh, organic produce in their diets for wellness and nutritional benefits.

Secondly, the market serves customers who are looking for locally-sourced and seasonal produce to support community farmers and reduce their carbon footprint.

Additionally, the market attracts individuals with specific dietary needs, such as vegans, vegetarians, and those with food sensitivities who require a variety of fresh produce options.

Culinary professionals, including chefs and caterers, represent another segment, seeking high-quality ingredients to enhance their dishes.

SWOT Analysis

A SWOT analysis of the fruit and vegetable market project highlights several key factors.

Strengths include a strong focus on fresh, high-quality produce, relationships with local farmers, and a commitment to sustainability and eco-friendly practices.

Weaknesses might involve the perishable nature of inventory, the need for constant supply chain management, and potential seasonal fluctuations in product availability.

Opportunities exist in expanding the market's reach through online sales and delivery services, as well as in educating consumers about the benefits of eating fresh and local produce.

Threats could include competition from larger grocery chains with more buying power, adverse weather affecting crop yields, and potential economic downturns reducing consumer spending on premium produce.

Competitor Analysis

Competitor analysis in the fruit and vegetable market sector indicates a varied landscape.

Direct competitors include other local markets, organic food stores, and large supermarkets with extensive produce sections.

These competitors vie for customers who value convenience, variety, and price.

Potential competitive advantages for our market include superior product freshness, strong community ties, exceptional customer service, and a focus on sustainable and ethical sourcing.

Understanding the strengths and weaknesses of these competitors is crucial for carving out a niche and ensuring customer loyalty.

Competitive Advantages

Our fruit and vegetable market's dedication to offering the freshest and highest quality produce sets us apart from the competition.

We provide a wide array of fruits and vegetables, including rare and exotic items, to cater to the diverse tastes and needs of our customers.

Our commitment to sustainability, through supporting local farmers and minimizing waste, resonates with environmentally conscious consumers.

We also emphasize transparency and education about the source and benefits of our produce, fostering a trusting relationship with our clientele.

You can also read our articles about: - how to open a fruit and vegetable store: a complete guide - the customer segments of a fruit and vegetable store - the competition study for a fruit and vegetable store

The Strategy

Development plan.

Our three-year development plan for the fresh fruit and vegetable market is designed to promote healthy living within the community.

In the first year, our goal is to establish a strong local presence by sourcing a wide variety of high-quality, seasonal produce and building relationships with local farmers and suppliers.

The second year will focus on expanding our reach by setting up additional market locations and possibly introducing mobile market services to access a broader customer base.

In the third year, we plan to diversify our offerings by including organic and exotic fruits and vegetables, as well as implementing educational programs on nutrition and sustainable agriculture.

Throughout this period, we will be committed to sustainability, community engagement, and providing exceptional service to ensure we become a staple in our customers' healthy lifestyles.

Business Model Canvas

The Business Model Canvas for our fruit and vegetable market targets health-conscious consumers and those looking for fresh, local produce.

Our value proposition is centered on offering the freshest, high-quality fruits and vegetables, with a focus on local and organic options, and providing exceptional customer service.

We will sell our products through our physical market locations and consider an online ordering system for customer convenience, utilizing our key resources such as our relationships with local farmers and our knowledgeable staff.

Key activities include sourcing and curating produce, maintaining quality control, and engaging with the community.

Our revenue streams will be generated from the sales of produce, while our costs will be associated with procurement, operations, and marketing efforts.

Access a complete and editable real Business Model Canvas in our business plan template .

Marketing Strategy

Our marketing strategy is centered on community engagement and education.

We aim to highlight the health benefits of fresh produce and the environmental advantages of buying locally. Our approach includes community events, cooking demonstrations, and partnerships with local health and wellness organizations.

We will also leverage social media to showcase our daily offerings, share tips on healthy eating, and feature stories from our partner farmers.

Additionally, we plan to offer loyalty programs and seasonal promotions to encourage repeat business and attract new customers.

Risk Policy

The risk policy for our fruit and vegetable market focuses on mitigating risks associated with perishable goods, supply chain management, and market fluctuations.

We will implement strict quality control measures and develop a robust inventory management system to minimize waste and ensure product freshness.

Building strong relationships with a diverse group of suppliers will help us manage supply risks and price volatility.

We will also maintain a conservative financial strategy to manage operational costs effectively and ensure business sustainability.

Insurance coverage will be in place to protect against unforeseen events that could impact our business operations.

Why Our Project is Viable

We believe in the viability of a fruit and vegetable market that prioritizes freshness, quality, and community health.

With a growing trend towards healthy eating and local sourcing, our market is well-positioned to meet consumer demand.

We are committed to creating a shopping experience that supports local agriculture and provides educational value to our customers.

Adaptable to market trends and customer feedback, we are excited about the potential of our fruit and vegetable market to become a cornerstone of healthy living in our community.

You can also read our articles about: - the Business Model Canvas of a fruit and vegetable store - the marketing strategy for a fruit and vegetable store

The Financial Plan

Of course, the text presented below is far from sufficient to serve as a solid and credible financial analysis for a bank or potential investor. They expect specific numbers, financial statements, and charts demonstrating the profitability of your project.

All these elements are available in our business plan template for a fruit and vegetable market and our financial plan for a fruit and vegetable market .

Initial expenses for our fruit and vegetable market include costs for securing a retail space in a high-traffic area, purchasing refrigeration units and display equipment to maintain and showcase fresh produce, obtaining necessary permits and licenses, investing in a robust inventory management system, and launching marketing initiatives to attract customers to our location.

Our revenue assumptions are based on an in-depth analysis of the local market demand for fresh, high-quality fruits and vegetables, taking into account the increasing trend towards healthy eating and organic produce.

We expect sales to grow steadily as we establish our market's reputation for offering a wide variety of fresh and locally sourced produce.

The projected income statement outlines expected revenues from the sale of fruits and vegetables, cost of goods sold (including procurement, transportation, and storage), and operating expenses (rent, marketing, salaries, utilities, etc.).

This results in a forecasted net profit that is essential for assessing the long-term viability of our fruit and vegetable market.

The projected balance sheet will reflect assets such as refrigeration and display equipment, inventory of fresh produce, and liabilities including any loans and operational expenses.

It will provide a snapshot of the financial condition of our market at the end of each fiscal period.

Our projected cash flow statement will detail all cash inflows from sales and outflows for expenses, helping us to predict our financial needs and ensure we have sufficient funds to operate smoothly.

The projected financing plan will outline the sources of funding we intend to tap into to cover our initial setup costs and any additional financing needs.

The working capital requirement for our market will be carefully managed to maintain adequate liquidity for day-to-day operations, such as purchasing fresh stock, managing inventory, and covering staff wages.

The break-even analysis will determine the volume of sales we need to achieve to cover all our costs and begin generating a profit, marking the point at which our market becomes financially sustainable.

Key performance indicators we will monitor include the turnover rate of our inventory, the gross margin on produce sales, the current ratio to evaluate our ability to meet short-term obligations, and the return on investment to gauge the profitability of the capital invested in our market.

These metrics will be instrumental in assessing the financial performance and overall success of our fruit and vegetable market.

If you want to know more about the financial analysis of this type of activity, please read our article about the financial plan for a fruit and vegetable store .

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Yahoo Finance

France's atos cuts financial targets but says restructuring still on track.

By Tassilo Hummel

PARIS (Reuters) -French IT firm Atos on Monday said it would have less cash at hand over the next few years as sales are being dragged down by a weaker business environment, but added this would not impact the key terms of its financial restructuring plan.

Atos - once seen as one of Europe's champions in the software and technology sector - has been teetering on the brink of financial collapse in recent months, although it secured a crucial restructuring deal with banks and bondholders in June.

Atos said it now forecast a full-year 2024 group revenue of 9.7 billion euros ($10.72 billion), down from 9.8 billion euros previously estimated. The company added it still saw positive, but somewhat lower, cash generation in 2026.

The group's operating margin will come in at 2.4% of revenue this year, down from 2.9% previously targeted.

The company's leverage ratio is also now expected to come below a multiple of 2.0 during 2027, later than a previous end-2026 deadline, and Atos also lowered its 2027 revenue and operating margin targets.

A court hearing for the approval of the accelerated safeguard plan will take place on October 15, Atos said.

Atos' restructuring plan, which is expected to result in massive dilution of existing shareholders, is set to be implemented following the court approval, with several capital increases and debt issuance planned from November 2024 until January 2025.

The company last month posted a wider first-half operating loss, citing impairment charges and lower sales in the Americas and a slowdown in public-sector orders in Europe.

($1 = 0.9048 euros)

(Reporting by Tassilo Hummel;Editing by Sudip Kar-Gupta)

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Money blog: Oasis resale U-turn as official reseller lowers fee amid criticism

The Money blog is your place for consumer and personal finance news and tips. Today's posts include Twickets lowering fees for Oasis tickets, the extension of the Household Support Fund and O2 Priority axing free Greggs. Listen to a Daily podcast on the Oasis ticket troubles as you scroll.

Monday 2 September 2024 20:11, UK

• Oasis resale U-turn as Twickets lowers fee after criticism
• Millions to get cost of living payments this winter as scheme extended
• O2 Priority customers fume as Greggs perk scaled back
• Listen to the Daily above and tap here to follow wherever you get your podcasts

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Twickets has announced it is lowering its charges after some Oasis fans had to pay more than £100 in extra fees to buy official resale tickets.

The site is where the band themselves is directing people to buy second-hand tickets for face value - having warned people against unofficial third party sellers like StubHub and Viagogo.

One person branded the extra fees "ridiculous" (see more in 10.10 post), after many people had already been left disappointed at the weekend when Ticketmaster's dynamic pricing pushed tickets up by three times the original advertised fee.

Twickets said earlier that it typically charged a fee of 10-15% of the face value of the tickets.

But it has since said it will lower the charge due to "exceptional demand" from Oasis fans - taking ownership of an issue in a way fans will hope others follow. 

Richard Davies, Twickets founder, told the Money blog: "Due to the exceptional demand for the Oasis tour in 2025, Twickets have taken the decision to lower our booking fee to 10% and a 1% transactional fee (to cover bank charges) for all buyers of their tickets on our platform. In addition we have introduced a fee cap of £25 per ticket for these shows. Sellers of tickets already sell free of any Twickets charge.

"This ensures that Twickets remains hugely competitive against the secondary market, including sites such as Viagogo, Gigsberg and StubHub.

"Not only do these platforms inflate ticket prices way beyond their original face value but they also charge excessive booking fees, usually in the region of 30-40%. Twickets by comparison charges an average fee of around 12.5%"

The fee cap, which the Money blog understands is being implemented today, will apply to anyone who has already bought resale tickets through the site.

Mr Davies said Twickets was a "fan first" resale site and a "safe and affordable place" for people to trade unwanted tickets.

"The face value of a ticket is the total amount it was first purchased for, including any booking fee. Twickets does not set the face value price, that is determined by the event and the original ticketing company. The price listed on our platform is set by the seller, however no one is permitted to sell above the face-value on Twickets, and every ticket is checked before listing that it complies with this policy," he said.

Meanwhile, hundreds of people have complained to the regulator about how Oasis tickets were advertised ahead of going on sale. 

The Advertising Standards Authority said it had received 450 complaints about Ticketmaster adverts for the gigs.

Some  expressed their anger on social media , as tickets worth £148 were being sold for £355 on the site within hours of release, due to the "dynamic pricing" systems.

A spokesperson from ASA said the complainants argue that the adverts made "misleading claims about availability and pricing".

They added: "We're carefully assessing these complaints and, as such, can't comment any further at this time.

"To emphasise, we are not currently investigating these ads."

Ticketmaster said it does not set prices and its website says this is down to the "event organiser" who "has priced these tickets according to their market value".

Despite traditionally being an affordable staple of British cuisine, the average price for a portion of fish and chips has risen by more than 50% in the past five years to nearly £10, according to the Office for National Statistics.

Sonny and Shane "the codfather" Lee told Sky News of the challenges that owning J-Henry's Fish and Chip Shop brings and why prices have skyrocketed. 

"Potatoes, fish, utilities, cooking oil - so many things [are going up]," he said. 

Shane also said that he is used to one thing at a time increasing in price, but the outlook today sees multiple costs going up all at once.  

"Potatoes [were] priced right up to about £25 a bag - the previous year it was about £10 a bag," Sonny said, noting a bad harvest last year. 

He said the business had tried hake as a cheaper fish option, but that consumers continued to prefer the more traditional, but expensive, cod and haddock. 

"It's hard and we can we can absorb the cost to a certain extent, but some of it has to be passed on," Shane added. 

After a long Saturday for millions of Oasis fans in online queues, the culture secretary says surge pricing - which pushed the price of some tickets up by three times their original advertised value to nearly £400 - will be part of the government's review of the ticket market. 

On today's episode of the Daily podcast, host Niall Paterson speaks to secondary ticketing site Viagogo. While it wasn’t part of dynamic pricing, it has offered resale tickets for thousands of pounds since Saturday. 

Matt Drew from the company accepts the industry needs a full review, while Adam Webb, from the campaign group FanFair Alliance, explains the changes it would like to see.

We've covered the fallout of the Oasis sale extensively in the Money blog today - see the culture secretary's comments on the "utterly depressing" inflated pricing in our post at 6.37am, and Twickets, the official Oasis resale site, slammed by angry fans for its "ridiculous" added fees at 10.10am.

The growing backlash culminated in action from Twickets - the company said it would lower its charges after some fans had to pay more than £100 in extra fees for resale tickets (see post at 15.47).

Tap here to follow the Daily podcast - 20 minutes on the biggest stories every day

Last week we reported that employers will have to offer flexible working hours - including a four-day week - to all workers under new government plans.

To receive their full pay, employees would still have to work their full hours but compressed into a shorter working week - something some workplaces already do.

Currently, employees can request flexible hours as soon as they start at a company but employers are not legally obliged to agree.

The Labour government now wants to make it so employers have to offer flexible hours from day one, except where it is "not reasonably feasible".

You can read more of the details in this report by our politics team:

But what does the public think about this? We asked our followers on LinkedIn to give their thoughts in an unofficial poll.

It revealed that the overwhelming majority of people support the idea to compress the normal week's hours into fewer days - some 83% of followers said they'd choose this option over a standard five-day week.

But despite the poll showing a clear preference for a compressed week, our followers appeared divided in the comments.

"There's going to be a huge brain-drain as people move away from companies who refuse to adapt with the times and implement a 4 working week. This will be a HUGE carrot for many orgs," said Paul Burrows, principal software solutions manager at Reality Capture.

Louise McCudden, head of external affairs at MSI Reproductive Choices, said she wasn't surprised at the amount of people choosing longer hours over fewer days as "a lot of people" are working extra hours on a regular basis anyway.

But illustrator and administrative professional Leslie McGregor noted the plan wouldn't be possible in "quite a few industries and quite a few roles, especially jobs that are customer centric and require 'round the clock service' and are heavily reliant upon people in trades, maintenance, supply and transport". 

"Very wishful thinking," she said.

Paul Williamson had a similar view. He said: "I'd love to know how any customer first service business is going to manage this."

We reported earlier that anyone with O2 Priority will have their free weekly Greggs treats replaced by £1 monthly Greggs treats - see 6.21am post.

But did you know there are loads of other ways to get food from the nation's most popular takeaway for free or at a discount?

Downloading the Greggs app is a good place to start - as the bakery lists freebies, discounts and special offers there regularly. 

New users also get rewards just for signing up, so it's worth checking out. 

And there's a digital loyalty card which you can add virtual "stamps" to with each purchase to unlock discounts or other freebies.  

Vodafone rewards

Seriously begrudged Virgin Media O2 customers may want to consider switching providers. 

The Vodafone Rewards app, VeryMe, sometimes gives away free Greggs coffees, sausage rolls, sweet treats and more to customers.

Monzo bank account holders can grab a sausage roll (regular or vegan), regular sized hot drink, doughnut or muffin every week. 

Birthday cake

Again, you'll need the Greggs award app for this one - which will allow you to claim one free cupcake, cream cake or doughnut for your birthday each year.

Octopus customers

Octopus Energy customers with smart meters can claim one free drink each week, in-store from Greggs (or Caffè Nero).

The Greggs freebie must be a regular size hot drink.

Make new friends

If you're outgoing (and hungry), it may be worth befriending a Greggs staff member.

The staff discount at Greggs is 50% on own-produced goods and 25% off branded products. 

If you aren't already aware, Iceland offers four Greggs sausage rolls in a multi-pack for £3. 

That means, if you're happy to bake it yourself, you'll only be paying 74p per sausage roll. 

Millions of Britons could receive extra cash to help with the cost of living this winter after the government extended the Household Support Fund.

A £421m pot will be given to local councils in England to distribute, while £79m will go to the devolved administrations.

The fund will now be available until April 2025 having been due to run out this autumn.

Councils decide how to dish out their share of the fund but it's often via cash grants or vouchers.

Many councils also use the cash to work with local charities and community groups to provide residents with key appliances, school uniforms, cookery classes and items to improve energy efficiency in the home.

Chancellor Rachel Reeves said: "The £22bn blackhole inherited from the previous governments means we have to take tough decisions to fix the foundations of our economy.

"But extending the Household Support Fund is the right thing to do - provide targeted support for those who need it most as we head into the winter months."

The government has been criticised for withdrawing universal winter fuel payments for pensioners of up to £300 this winter - with people now needing to be in receipt of certain means-tested benefits to qualify.

People should contact their local council for details on how to apply for the Household Support Fund - they can find their council  here .

Lloyds Bank app appears to have gone down for many, with users unable to see their transactions. 

Down Detector, which monitors site outages, has seen more than 600 reports this morning.

It appears to be affecting online banking as well as the app.

There have been some suggestions the apparent issue could be due to an update.

Another disgruntled user said: "Absolutely disgusting!! I have an important payment to make and my banking is down. There was no warning given prior to this? Is it a regular maintenance? Impossible to get hold of someone to find out."

A Lloyds Bank spokesperson told Sky News: "We know some of our customers are having issues viewing their recent transactions and our app may be running slower than usual.

"We're sorry about this and we're working to have everything back to normal soon."

We had anger of unofficial resale prices, then Ticketmaster's dynamic pricing - and now fees on the official resale website are causing consternation among Oasis fans.

The band has encouraged anyone wanting resale tickets to buy them at face value from Ticketmaster or Twickets - after some appeared for £6,000 or more on other sites.

"Tickets appearing on other secondary ticketing sites are either counterfeit or will be cancelled by the promoters," Oasis said.

With that in mind, fans flocked to buy resale tickets from the sites mentioned above - only to find further fees are being added on. 

Mainly Oasis, a fan page, shared one image showing a Twickets fee for two tickets as high as £138.74. 

"Selling the in demand tickets completely goes against the whole point of their company too… never mind adding a ridiculous fee on top of that," the page shared. 

Fan Brad Mains shared a photo showing two tickets priced at £337.50 each (face value of around £150, but increased due to dynamic pricing on Saturday) - supplemented by a £101.24 Twickets fee. 

That left him with a grand total of £776.24 to pay for two tickets.

"Actually ridiculous this," he  said on X .

"Ticketmaster inflated price then sold for 'face value' on Twickets with a £100 fee. 2 x £150 face value tickets for £776, [this] should be illegal," he added. 

Twickets typically charges between 10-15% of the ticket value as its own fee. 

We have approached the company for comment.

Separately, the government is now looking at the practice of dynamic pricing - and we've had a response to that from the Competition and Markets Authority this morning.

It said: "We want fans to get a fair deal when they go to buy tickets on the secondary market and have already taken action against major resale websites to ensure consumer law is being followed properly. 

"But we think more protections are needed for consumers here, so it is positive that the government wants to address this. We now look forward to working with them to get the best outcomes for fans and fair-playing businesses."

Consumer protection law does not ban dynamic pricing and it is a widely used practice. However, the law also states that businesses should not mislead consumers about the price they must pay for a product, either by providing false or deceptive information or by leaving out important information or providing it too late.

By James Sillars , business reporter

It's a false start to the end of the summer holidays in the City.

While London is mostly back at work, trading is fairly subdued due to the US Labor (that's labour, as in work) Day holiday.

US markets will not open again until Tuesday.

There's little direction across Europe with the FTSE 100 trading nine points down at 8,365.

Leading the gainers was Rightmove - up 24%. The property search website is the subject of a possible cash and shares takeover offer by Australian rival REA.

The company is a division of Rupert Murdoch's News Corp.

One other point to note is the continuing fluctuation in oil prices.

Brent crude is 0.7% down at the start of the week at $76.

Dragging the cost lower is further evidence of weaker demand in China.

Australia's REA Group is considering a takeover of Rightmove, in a deal which could be worth about £4.36bn.

REA Group said in a statement this morning there are "clear similarities" between the companies, which have "highly aligned cultural values".

Rightmove is the UK's largest online property portal, while REA is Australia's largest property website. 

It employs more than 2,800 people and is majority-owned by Rupert Murdoch's News Corp,.

REA Group said: "REA sees a transformational opportunity to apply its globally leading capabilities and expertise to enhance customer and consumer value across the combined portfolio, and to create a global and diversified digital property company, with number one positions in Australia and the UK.

"There can be no certainty that an offer will be made, nor as to the terms on which any offer may be made."

Rightmove has been approached for comment.

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