7 Sales Forecasting Methods: Explained with Examples

Most organizations simultaneously employ sales forecasting strategies to obtain more projections. No sales forecasting system is 100% accurate, but having some insight into the future is better than having none at all. But if you have an experienced sales team and don’t have a lot of historical data to draw on this method could be an option for you. Looking for help analyzing your data in order to forecast your sales goals and devise quotas? Many feature not only sales contact tracking, but some utilize complex artificial intelligence to help you predict customer behaviors and close more deals. Even the best sales forecasts can be cast into disarray by unforeseen events – the Covid-19 outbreak is but one example of how even the best projections can be off thanks to factors no one saw coming.

This tactic is often the result of panic; without the proper strategy, it jeopardizes a business’s profitability. Dedicated analytics tools also have the advantage of staying updated in real time. They can give clearer insight into sales pipelines, products, and staff performance. They can help with everything from spotting opportunities for growth to working out which team members to assign to which clients.

Why are sales forecasts important?

Armed with this information, you can compare to current in-progress sales. Deals that are approaching the 20–day mark can be considered good candidates to close – meaning you can make projections based on that revenue and data. While not as detailed or robust as full historical or multivariable forecasting, test market analysis forecasting can offer some insight into how your customers will respond to a new product. Pipeline forecasting can give you some very detailed and potentially very accurate projections if you put in the work. Opportunity forecasting operates on the idea that you’ll predict the number of sales you can generate through your funnel and pipeline. Our next sales forecasting model is a lot more detailed – and because of that, it can lead to much better results.

It might also show that a particular product or service is failing to deliver appropriate amounts of value. This means that sales forecasts have the potential to make or break a business. Let’s say that last month, you had $150,000 of monthly recurring revenue and that for the last 12 months, sales revenue has grown 12% each month. Over sales forecasting the same period, your monthly churn has been about 1% each month. Here are some basic examples demonstrating how sales forecasting is done in the real world. This method is slightly more accurate but ignores other factors that may have changed in the last year, like the number of sales reps you have, or how your competitors are doing.

A sales forecast is a performance assessment tool.

Market and industrial behaviours must also be taken into consideration. You need to be on top of what is happening in the market – new products, prices, technology advancement, designs, and promotional activities. You have to know what your competitors are doing and how they are faring in the market as well. The act of planning is always one of the best ways to ensure adaptability to your business’ ever-changing ecosystem. It reduces uncertainty and leads you to increased responsiveness and improved services.

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. Some businesses, for instance, will add a score to the conversion probability of their various prospects according to the gut feeling of their salespeople. It’s critical that both of these factors are in place to make sure this forecasting method has the best chance of success.

Why is sales forecasting essential?

You can use different forecasting methods, from opportunity stage forecasting to multivariable analysis. If you don’t have a CRM or sales software, you can use sales forecast templates like those from Hubspot. Whatever route you decide, keep in mind the different factors that impact your sales forecasts, such as seasonality, market shifts, and the like. Sales forecasts help the https://www.bookstime.com/ entire business plan resources to ship products, pay for marketing, hire employees, and beyond. Accurate sales forecasting yields a well-oiled machine that meets customer demand, both today and in the future. And internally on sales teams, sales revenue that delivers in its estimated time period keeps leaders and collaborators happy, just like a shipment that arrives on time.