Plan and forecast sales

Avoid common mistakes in sales forecast


Sales forecasting is important for business planning. It helps companies predict revenue, allocate resources, and set goals. However, common mistakes can lead to inaccurate forecasts, which can have significant consequences. Here's a guide on avoiding common mistakes.

Avoid overly optimistic sales projections

It's important to maintain a positive outlook but being overly optimistic with your sales forecasting won't benefit your business. It's a good idea to look back at the previous year's forecast to see if your figures were realistic. New businesses should avoid putting the level of sales they need for the business to be viable as the forecast.

Ensure your sales forecast is achievable 

For a realistic sales forecast, you should consider if predicted sales levels are achievable. For example:

  • a taxi can only make a certain number of airport trips each day considering factors like travel time, traffic, and breaks for the driver
  • a machine can only produce a set number of components on each shift, limited by factors such as the machine's speed, maintenance needs, and operator efficiency
  • a sales team can only visit a certain number of customers each week due to constraints like travel time, meeting durations, and preparation for each visit

Use historical sales data for reliable market growth assumptions

When forecasting sales, it's important to use past sales data to make market growth projections more reliable. Otherwise, you may end up with conflicting information. For instance, if you assume a declining market, it's illogical to forecast increased sales. For more information, see sales forecast assumptions.

Agree on forecast timelines

It's advisable to set a specific timeline to finalise and agree on the forecast. Spending too much time refining your forecast can distract you from focusing on your targets. Aim to minimise adjustments, regardless of whether the forecast appears overly optimistic or pessimistic.

Engage with your team for collaborative forecasting

If you have a dedicated sales team, they will offer insights into customer buying plans. Collaborate with them for more accurate sales projections:

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

Leverage feedback to refine sales forecasts

Once you've developed your sales forecast, it's important to have it reviewed by someone experienced. Consider asking an accountant or a senior sales representative, to review the whole document. Their feedback can help identify any overlooked factors or potential improvements ensuring accurate and reliable forecasts.