Plan and forecast sales

Developing your sales forecast

Guide

Start by writing down your sales forecast assumptions.

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

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

How to calculate sales forecast?

For example, you might predict that a customer will buy £1,000 worth of products. If you estimate that there's a 70% chance of this happening, the forecast sales for this customer are £700, ie 70% of £1,000.

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

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

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

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

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