5 Essential Sales Forecast Tips & Examples

Table of Contents

Table of Contents

A sales forecast can play a significant role in an organization's success and growth. The definition of a sales forecast is the prediction of which deals will move through the sales cycle and a projection of future sales revenue.

Without the sales revenue forecast process, business leaders or salespeople may end up making mediocre decisions. Revenue-impacting factors, prospecting, budgeting, hiring, and setting company goals are made simpler with accurate sales forecasts.

If you are unsure of how a sales forecast works or want to implement one into your business model, this article explains everything in detail.

By the end of the piece, readers will understand what a sales forecast is, view examples of sales forecasts, learn about sales forecast importance, and even receive helpful tips for their forecasting escapades.

What Is a Sales Forecast?

What Is a Sales Forecast

Determining expected sales revenue is the primary expression of a sales forecast. Estimating how many services or products your company plans to sell within a specific period can help prepare for the future. Keeping a high degree of accuracy produces some of the best sales forecast results.

There are different examples of sales forecasts, and rightfully so. Not every business is built the same, so considering individual requirements is recommended. Some sales forecasts depend on artificial intelligence (AI) or even a sales representative's intuition.

Answering two chief questions is the primary purpose of a sales forecast:

  1. When: A sales forecast pinpoints the year, quarter, or month the sales staff expects the revenue increase.
  2. How much: By considering all prospective information, the sales team estimates a figure that is in line with the business. Whether it's $300 or $1 million, each potential sale has an amount it'll bring into the organization.

It's no simple task to determine these projections, as numerous factors could affect the sales forecast. Below are the five elements that business owners should consider before beginning the sales forecast process:

  1. Who: The accuracy of a sales forecast generally depends on who your prospects are. Whether the buyer is a sales influencer or the actual decision maker will determine the value of the sales forecast.
  2. What: Whatever product or service your company is trying to sell should resolve your prospect's problems. Suppose you can solve their issues uniquely; your organization's performance should increase drastically. Once a business has decided its fortay, a sales forecast must include the exact items it plans to sell.
  3. Where: Understanding where products are used and how buying decisions are made provides a clearer picture of the outcome. When motivated sales teams locate this information and get closer to the action, better results are produced.
  4. Why: Comprehending why new or existing clients consider your services is key to getting more sales. Ask yourself, "why are these people purchasing from me?" "Was there a significant event that's affecting their decision-making?" Without a clear why and forcing function, deals may get stuck in the sales funnel indefinitely.
  5. How: Ask yourself how your client decides to purchase your product and what steps they take before making that decision.If the previous and current purchasing decisions aren't considered, creating an accurate sales forecast may be challenging.

Some of these factors are speculative, while others are based on solid evidence. The more products you sell and the longer they're sold improve your forecasting abilities. Think of sales forecasting as an equilibrium between a science and an art.

The Benefits of a Sales Forecast

Benefits of a Sales Forecast

There is a multitude of benefits company owners receive when implementing a sales forecast into their organization's plan. Number one is that sales forecasting is essential in determining an enterprise's future financial health and revenue expectations.

Let's look at the other advantages proprietors acquire when utilizing a sales forecast to predict upcoming income.

Benefit #1 - Sales Planning

Sales is a challenging game to partake in, but with reliable forecasts, you can plan for the future more efficiently. The success of a business revolves around how many sales it makes. Determining the company's financial output can help you stay on top of promotion and marketing efforts.

Every sales plan should include:

  • Product road maps
  • Targeted accounts
  • Sales and marketing coordination
  • Forecasts
  • SKUs
  • Targeted Verticals

Sales forecasts predict sales expectations and volumes utilizing historical data. This information is compared against competitors to determine an increase or decrease of product sales during a particular period.

Benefit #2 - Production Planning

When your sales planning is on track, excellent production planning is inevitably on the cards. Knowing how much a business will sell provides company owners with information concerning the amount of product they need to produce.

Manufacturing the exact number of items that will be sold is a fantastic way to stick to a budget. This financial advantage helps avoid stockout, overstock, and product availability issues.

Benefit #3 - Product Purchasing

Under and overspending is mitigated when purchasing raw materials based on sales forecasting tools. Once the production phase is planned, determine what's needed to create stock cost-effectively.

Benefit #4 - Reduce Inventory Costs

Rather than buying surplus inventory, a sales forecast can give you exact figures for the materials required. Not only does sales forecasting protect a business's capital but helps warehouse costs, inventory levels, and other operational areas.

Benefit #5 - Reduced Warehouse Expenses

Once cash is saved through correct inventory management, companies begin to see other expenses lower. The most significant area of reduction most organization owners experience is warehouse costing.

With accurate stock keeping, your factory can operate more efficiently, improving shipping procedures, turnover rates, and stress levels. Sales forecasting software is geared towards significantly improving warehouse operations for greater peace of mind.

Benefit #6 - Effective Labor Management

Without employees, most sales-based companies will fail to exist, and truthfully so. The various operational improvements from sales forecasting software allow you to manage your staff better.

You can employ only competent staff, monitor their working hours, and schedule their payments. That gives you better management of the business's employees and cash flow.

Benefit #7 - Monitoring Performance

A retail sales forecast gives you the advantage of tracking the performance of each key element. With the ability to identify areas of interest, sales forecasting can show business owners what needs improvement.

Utilizing the Correct Sales Forecasting Tools

Now that the benefits of using a sales forecast chart to strengthen areas of a business are evident, it's crucial to find the one that matches your criteria. Ringy helps organizations effectively manage their sales funnels and close more deals through its intuitive user interface.

Irrelevant to the industry, Ringy is designed to make contacting and following up on customer orders simple. Start-ups, financial services, recruiting, insurance, remote sales, SaaS, lawyers, and agencies utilize this innovative CRM (Customer Relationship Management) platform to create sales forecasts.

Factors That Can Impact a Sales Forecast

Factors Impacting Sale Forecast

Various factors and limitations can affect the accuracy of a company's sales forecasting results. Any industry, community, economy, or business changes can influence the organization's future earnings estimates.

These common elements affect sales and should be considered when creating a sales forecast for your business:

General Business Conditions

The general environment and company conditions play an integral role when planning a sales forecast with your team. Below are some economic conditions that affect enterprise forecasting:

  • Government policies
  • Per-capita income
  • Fashion
  • Seasonal fluctuations
  • General customs and traditions
  • Distributions of wealth
  • Population
  • Country

These factors cannot be controlled by the organization and therefore should be monitored closely.

Industry Conditions

An enterprise's sales forecasting is affected by numerous elements within its industry. These factors include but are not limited to the following:

  • Strategies and policies of competitors
  • Potential improvements to the product or service
  • The situation of competition within the industry
  • Service or product line
  • Pricing policy
  • The characteristics of the product or service
  • Types of products or services
  • Number of units available in the industry

A marketing manager should scrupulously consider these factors while arranging a sales forecast for the business.

Internal Factors of the Organization

Internal factors within the business can influence the sales forecast report of an enterprise. Resources, advertisement policy, price, quality, and plant capacity are some aspects to consider when going through the sales forecast process. The company can control these elements and should be to increase potential earnings.

Export Trade Factors

Depending on the product sold, the government's import-export policies can affect a company's sales forecasting. Most countries have international regulations which restrict specific products and include additional fees for foreign purchases.

An expert marketing manager can help you consider these factors when deciding which part of the world to sell your products or services.

Factors Correlating to the Opposition

Taking an in-depth look at factors relating to the competition is what adroit business owners do while preparing a sales forecast. These competitor elements may affect the sales forecasting of an organization:

  • Advertisement policy
  • Stages in the life cycle of the products
  • Quality of products
  • Color
  • Brand packaging
  • The Popularity of the items
  • Number of competitors

Businesses can have a better idea of their potential sales within an industry once these attributes are considered.

5 Essential Sales Forecast Tips

Essential Sales Forecast Tips

Small businesses can benefit tremendously from sales forecasting. These start-ups are exposed to various factors that can affect their enterprise's financial well-being. Likewise, larger organizations get the advantage of multiple variables counterbalancing each other.

With a prominently built sales pipeline and forecast report, businesses have an edge over their competition. Changes to company policies or processes can be handled sooner because future revenue is predictable.

Begin improving your company's sales forecasting accuracy with these five helpful tips:

Use Data to Make Decisions

Wishful thinking is not how a sales forecast should be approached. If you want reliable results, looking at previous transactions is suggested. Gather as much conclusive data (evidence) as possible for a better overall view of a business's performance.

If you're wondering, "how do I even go about collecting this data?" do not fret! There are many ways to measure sales success, as well as software and tools that can aid in the process.

Select the Correct Software

With the vast selections of sales forecasting software tools available, some proprietors delay the integration of one into their business plan. Quantitative and qualitative data form the foundation of any sales forecast report. This information provides insights into performance numbers and shows why the decrease or increase occurred.

Automation is another must-have feature of sales forecasting software. Sales and marketing automation tools monitor and compile data to help minimize the potential for human error. With sufficient and accurate sales information, future revenue predictions are made more precisely.

Determine Key Business Metrics

Vanity, inaccurate data, and outdated metrics are the downfall of many small business sales forecast attempts. You'll experience no improvement if you base a sales forecast on something that feels good.

Sales KPIs (Key Performance Indicators) and the type of marketing metrics you gather are vital to revenue prediction success. When you become very specific about this data, the chances of hitting a predetermined income target are higher.

The basis of good sales performance metrics is uncomplicated. Ensure all KPIs are a ratio or rate, actionable, and comparable. The measure of progress and improvements is easily accessible by employing a comparison technique.

Setting Weekly Sales Forecast Meetings

Keeping a sales team updated with the plans and goals of the business is key to achieving results. However, some unorthodox individuals drastically affect the final figures determined in the initial sales forecast.

Here are three reasons weekly meetings are essential:

  1. Encourages teams to brainstorm ideas
  2. Helps identify issues before they become a greater concern
  3. Leads to improvements in business processes and team adroitness

Additionally, having employees working coherently towards a company's goals creates an overall better work environment.

Forecast Killers - Red Flags

Gathering and deciphering data is not the only process required for an accurate sales forecast. Locating red flags and removing them before they affect the outcome is quintessential to succeeding.

Examples of red flags include sales that have sat in the sales pipeline for extended periods, ones that have missed their closing data numerous times, or deals that are experiencing stagnation. Identifying the red flags within these transactions allows company owners to better prepare for future endeavors.

Here are four other red flags sales businesses encounter:

  1. Minimal activity on a deal
  2. Late forecasted closing dates
  3. Purchaser's job title (are they the decision maker?)
  4. Lead source legitimacy

Once all red flags are considered, future forecasting estimations are predicted more consistently.

Sales Forecast Examples

Sales Forecast Examples

There are many sales forecast examples that may be relevant to your business. Forecasting based on your current funnels, historical data, and multiple variables or lead scores are the top three ways to predict foreseeable income.

Forecasting Based on Historical Sales Data

Let's say that a 12-month sales forecast has grown 12% each month, and the preceding month's recurring revenue was $150,000. Over the same time, the company's monthly churn rate is sitting at 1%.

The following month's forecasted revenue would be one hundred and sixty-six thousand five hundred dollars.

The formula requires you to multiply the previous month's earnings by growth expectations, then subtract the churn amount.

($150,000 multiplied by 1.12) minus ($150,000 multiplied by .01) equals $166,500

Even though this system is basic, it can still be used to determine potential growth in a popular business.

Forecasting Based on a Current Funnel

Here's an example of a business with three potential sales opportunities in its current funnel:

  1. The expected value of $1000 for a quick phone call with a client
  2. A customer who receives a full demo at the expected value of $1,500
  3. The decisions maker wants a product or service with an expected value of $1,200

After meticulous calculations, you've figured out that each opportunity has the following percentage of concluding:

  • "Phone call with a client" = 30% chance of closing
  • "Full demo" = 40% chance of closing
  • "Product or service" = 70% chance of closing

The forecasted value of the deal is multiplied by the probability, then added together to give you a complete sales forecast report of $1740. Below is a table showing how this calculation works:

 

Scenario

Probability

Value

Forecasted amount

Opportunity #1

Phone call

30$

$1,000

$300

Opportunity #2

Full demo

40%

$1,500

$600

Opportunity #3

Product/Service

70%

$1,200

TOTAL

$840

$1,740

Forecasting Based on Multiple Variables and Lead Scores

After significant research, you can set up lead scoring in your CRM. Leads are segmented into three categories of qualitative data. The potential of an opportunity closing is determined by the above information.

Businesses with less than 50 staff members tend to close at a moderately lower rate - while larger enterprises with more than 50 workers close more often. Average opportunity sizes are utilized to calculate the forecasted value of a potential sale.

Here is an example table to determine a sales forecast for your small to medium-sized company:

Lead Score

Close Rate

Close Rate

Expected Opportunity Value ($4000 - Average Sales Price)

 

0 - 50

51 - 100

 

A

25%

50%

$1,000 $2,000

B

12.50%

25%

$500 $1,000

C

2.50%

3.80%

$100 $150

New Product Sales Forecast Example

Launching a new product isn't a walk in the park. That's why many organizations create a sales forecast and perform a soft launch without expecting high earning potential.

After a product or service's release to the public, a forecasting template is used to monitor initial sales data and project where the business could be in the next five years. Here is an example of new product sales and profit forecasting model:

Product Sales Data

Value

Products

App

Year one estimated units sales

200

Year one unit price

$300.00

Unit price compound annual growth rate (CAGR) (years two to five)

5,00%

Year one market size

$80,000,000

Market size CAGR (years two to five)

10,00%

Year one variable cost per item

$350,00

Variable cost per unit CAGR (years two to five)

5,00%

Year one fixed expenses

$320,00

Fixed costs CAGR (two to five years)

3%

Target working capital (year five)

$250,000

Target market share

5%

Mapping out a company's future growth predictions is an excellent way to achieve your goals. Potential increases in revenue can only be estimated once the business has been open for one year. That gives you enough time to collect data and compare it against the original sales forecast.

FAQs

FAQ

What Is a Sales Forecast Report?

The number of services or products your enterprise is most likely to sell in a particular period is displayed on a sales forecast report. These documents allow leaders of a business to make more intelligent decisions when implementing revenue-impacting factors.

What Is a Sales Forecast Chart?

A sales forecast chart helps visualize past data and converts the information into a trend line. The tool can extend past the current data to show potential changes to the company's cash flow in the future.

How Do CRMs Affect Sales Forecasting?

Utilizing a customer relationship management system helps streamline the entire sales cycle, meaning you close more deals in your pipeline. Companies can increase their revenue by reducing production costs through the automation available on a CRM platform.

Conclusion

A sales forecast is the catalyst to success for organizations that utilize personal selling for their services or products. It can be used to make future revenue estimates, determine forthcoming expenses, and plan for the potential growth of a new business.

A few CRMs are the epitome of excellence when it comes to managing a sales funnel. Ringy is loaded with features and is the perfect all-in-one platform to collect the data required for a sales forecast.

It's easier to prepare, track, or close deals with the software's intuitive dashboard. The service allows sales representatives to deliver a personalized buying experience to all clients and remain on top of patron communications.

Request a demo to discover how Ringy can change the way your sales business operates.

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