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Business Discussions | 28 November, 2023

How to Forecast Sales

Sales forecasting is a strategic process that predicts the future sales performance of a business based on historical data and relevant market trends. It provides invaluable insights for decision-making, financial forecast, aiding in setting goals, allocating resources, and financial planning. Accurate sales forecasts and sales projection empower sales teams and business leaders to proactively address challenges, seize opportunities, and steer the company towards success.


What Are the Three Main Sales Forecasting Techniques?

With many sales forecasting methods out there, the three that stand out are: historical forecasting, opportunity stage forecasting, and multivariable analysis forecasting. The following will enable you to better forecast sales

Historical Forecasting

Historical forecasting relies on past sales data to predict future performance. By analyzing trends and patterns from previous periods, businesses can make informed predictions about upcoming sales. However, this method has limitations, as it doesn’t account for changes in market conditions or external factors.


Opportunity Stage Forecasting

This technique involves assessing the likelihood of closing deals based on different stages in the sales process. Each opportunity’s potential value is multiplied by the probability of closing, providing an overall forecast. While it’s relatively easy to implement, it may lack accuracy if opportunities are not regularly updated or if significant changes occur in the sales process.


Multivariable Analysis Forecasting

Multivariable analysis forecasting is the most sophisticated method, incorporating predictive analytics and various factors like average sales cycle length, probability of closing based on opportunity type, and individual rep performance. This data-driven approach offers high accuracy but requires advanced analytics solutions and clean, consistently tracked data.


How to Forecast Sales

Once we know what is sales forecasting, we can move onto creating a sales forecast.


Establish a Sales Process

Define a structured sales process for your team, ensuring consistency in stages and steps. This clarity enables accurate sales prediction of opportunity closure likelihood.


Set Individual and Team Quotas

Collaborate with sales representatives and leaders to establish clear sales quotas. These serve as benchmarks for performance evaluation and align with sales forecasting goals.


Invest in a CRM

Utilize Customer Relationship Management (CRM) tools, to track and manage opportunities. Accurate data entry ensures reliable forecasting.


Choose a Sales Forecasting Method

Select a suitable forecasting sales method based on your business’s needs, considering factors like the age of your business, team size, and data quality. Options include historical forecasting, opportunity stage forecasting, and multivariable analysis forecasting.


Include Data from Other Organizations

Collaborate with marketing, product, finance, and HR teams to gather insights beyond sales data. Understanding marketing strategies, product launches, financial goals, and HR requirements enhances the accuracy of your sales forecast.


Have Questions? Looking To Get Started?


Review Prior Sales Forecasts

Analyze previous sales forecasts and actual performance to identify discrepancies and learn from past experiences. This retrospective analysis informs adjustments for more accurate future sales predictions and precise income statements.


Keep Your Sales Team Informed and Accountable

Regularly communicate changes and decisions to your sales team. Utilize CRM tools to keep reps informed about interactions with leads, fostering accountability for achieving quotas and contributing to accurate sales forecasting.


Sales Forecasting Examples
​​Let’s delve into real-world scenarios with sales forecast methods:

Scenario 1: Historical forecasting in sales accurately predicted a surge in demand during the holiday season, allowing for proactive inventory management.


Scenario 2: Opportunity stage forecasting revealed a bottleneck in the sales process, prompting a strategic overhaul and improving overall accuracy.


Scenario 3: Multivariable analysis forecasting, incorporating diverse factors, precisely anticipated a shift in customer preferences, guiding product development strategies.

How to Forecast Future Sales

In order to predict future sales there needs to be a forward-thinking strategy in place:

Market Analysis:

Conduct a thorough analysis of market trends, customer behavior, and emerging industry developments to anticipate shifts in demand to improve predictive sales forecasting.


Scenario Planning:

Develop multiple scenarios based on different market conditions, allowing your business to be prepared for various outcomes.


Customer Feedback:

Engage with customers to gather insights into their needs and preferences. Customer feedback is a valuable resource for forecasting future product demand.


Competitor Analysis:

Keep a close eye on competitors’ strategies, market positioning and forecast in sales. Understanding competitive dynamics helps in predicting market trends and potential challenges in sales forecasts.


An effective sales forecast is a dynamic process that requires a combination of historical analysis, method selection, and collaboration across various organizational functions. By implementing these techniques and strategies, businesses can confidently navigate the future, making informed decisions and achieving sustainable growth.


So what is sales forecast? We hope this article provides you with more information on what is a sales forecast, how to forecast, and how to predict sales. For more detailed information and support, reach out to one of our business consultants at BSBCON.