A sales forecast is an estimate of the sales a company will achieve in a specific period. It is most common to create them quarterly, monthly, or annually. These forecasts are generated by considering sales from previous periods.
A sales forecast is an important resource for the success of a business, as it allows for more informed decision-making. However, for a sales forecast to be truly useful, it must be very precise and based on reliable data. Nevertheless, it is important to remember that it is an estimate and not a precise prediction, so it is not an error if it is not met exactly.
Sales forecasts are typically used by shareholders, executives, company leaders, and team leaders. Although the sales team is primarily responsible for its preparation, collaboration with other teams (such as marketing, finance, operations...) is crucial to make it as complete and accurate as possible.
In this article, we will tell you everything you need to know to correctly draft a sales forecast. Let’s go!
These are the data that must be present in your sales forecast, as their value is really useful for the study:
Without a sales forecast, companies might allocate more resources than necessary in their strategies and lose money, potentially putting themselves in a risky financial position. The predictions made in these reports help a business be more efficient and maintain the quality of its products or services.
Sales forecasts are also a valuable resource to anticipate trends and capitalize on them, as well as to avoid being heavily impacted by certain events. Regarding risks, since this is something analyzed when preparing such a report, the company is prepared and can take measures in time to avoid very negative consequences. Similarly, regarding trends, if they are considered in advance, strategies can be prepared to take advantage of them and maximize their benefits.
Resources can be better utilized and distributed among different tasks if based on a sales forecast. This way, unnecessary expenses are avoided.
Customer service can also be improved, especially because teams can better understand the company's situation and offer customers more realistic expectations about the timelines and characteristics of a product or service. This prevents customer frustration and disappointment.
The best part of creating a sales forecast is that you can rely on forecasting tools to obtain data and projections. These are software programs that combine your company's data with different statistical methods and market trends to generate sales estimates. Due to their great utility, the first step in creating a sales forecast is to choose the most suitable tool for your organization. We will give you some tips on this later.
Your forecasting tool will not be able to perform analyses tailored to your organization without a sufficient amount of data and a history to base on. Data software is designed to collect, store, and organize data, as well as integrate with forecasting tools to share information.
Before starting to use your forecasting tool, it is essential to define the parameters, methodology, and objectives you want to analyze. All these instructions must be provided to the forecasting tool so that it can make its projections based on them.
Once the tool has provided the necessary data, it will be your responsibility to organize the obtained data into a report to present them appropriately to the relevant team or professional. Additionally, although the tool provides part of this information, it is also up to the report's author to draw conclusions and explain them in the report.
Depending on what the forecasting tool bases its data and study on, we can find different types of sales forecasts.
This type of forecast considers the average duration of the sales cycle to make future sales predictions. It is commonly used in companies that sell products or services with a long and well-established sales cycle.
In this case, historical sales data is analyzed to detect patterns and trends with the aim of predicting future sales. It is used for products or services with a broad sales history.
This model takes into account the seasonality of sales to adjust the forecast throughout the year. It is typically used when selling products or services whose sales vary significantly annually.
In the regression model, sales are analyzed considering other factors such as advertising, GDP, price, etc. Variables that are assumed to be relevant and influence sales are selected.
In the market, you can find different forecasting tools. In our case, we consider HubSpot’s tool to be quite comprehensive. It has a large number of very useful features for making a sales forecast and is not difficult to use.
It is important that the forecasting tool you choose allows different team members to collaborate. This way, they can add valuable data and updates from each of their fields. For example, the HubSpot tool we mentioned earlier offers this possibility.
Even if your company’s data software or CRM is connected to your forecasting tool, it might be interesting to also include data from other sources when necessary. This way, the forecasts are more likely to increase their accuracy and be enriched.