Sales forecasting helps a company grow in a practical way, allowing salespeople to have a safer, more organized process and be able to work from what they already expect for the future.
Each seller needs to understand their process, their target audience’s market and be able to calculate, based on this information, the best projection for their sales for a given period.
So clearly sales forecasting is very important for all types of businesses.
In addition to measuring predictions of the future, it helps you work on the metrics of the present, and by evaluating your average ticket, you can see where you need to improve to make the present more efficient and the future with better results.
-> Dealflow spreadsheet and sales predictability
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- What is sales forecasting?
- Sales Forecast Calculation
- Sales Forecasting Methods
- 5 Sales Forecasting Examples
- Dealflow: the spreadsheet that helps in forecasting sales.
What is sales forecasting?
Sales forecasts say a lot about the future of a company, it is essential to be able to measure the efforts made and the results they can generate.
In order to have greater confidence in the commercial process, it is essential to make a sales projection, especially in private companies that have several leaders in the commercial area.
The added value is enormous when knowing how much that company will generate in the next moments of its sales cycle.
And thus having the opportunity to run a process with predictability, more chances of achieving goals with a lot of organization.
sales forecasting concept
Sales forecasting can be defined as a process that is able to calculate an estimate of sales revenue.
With predictions about the products and/or services offered by a company, sales team, the following weeks, the month, next quarter or even that whole year.
A sales projection is a projection of the market in which it operates, of how it will react to a company’s sales volume efforts in that market.
Sales Forecast Calculation
To calculate the sales forecast several methods are used and to calculate more accurately a forecast calculator is used.
#1: Lead Value Sales Forecast
Based on the analysis of accumulated sales data from previous years, this method is essential to assist marketing and sales professionals, especially in identifying possible forms of consumer behavior.
Where he can analyze preferences, different behavioral models, how the market turns according to his customers.
From this method, you can get a better sense of the probability that a lead will convert to your sale.
Better understanding what value each lead source has.
The calculation is done as follows:
Average Lead Value = Average Sales Price x Conversion rate from lead to customer
Average sales price per lead
#2: Lead Creation Sales Forecast
This method that performs the calculation of sales forecasts helps you to forecast the opportunities you have and which ones are more likely to close a sale.
Based on data from your customer base, on how they behave, on how the market they are inserted in is at the moment.
To calculate it is necessary to apply the following formula:
Expected Opportunity Value = Average Selling Price x Average Closing Rate
#3: Historical Forecast
The historical forecast method is more simplified than the others, for analyzing the sales forecast for a certain period of time.
Take into account a previous period of time corresponding to what you need to know the forecast for the future. However, I need to be aware of current market conditions.
They cannot have drastic changes since that corresponding previous time period you selected. So your prediction will be more accurate.
#4: Multivariate Analysis for Sales Forecasting
This method is more innovative, sophisticated, allowing to perform sales forecast through a multivariate analysis using predictive analytics.
Sales Forecasting Methods
The two sales forecasting methodologies used are: Bottom-up and Top-down forecasts.
Bottom-up sales forecasts project the quantities of units a company will sell and then multiply that number by the average cost per unit.
You can also increase the number of locations to review, the number of salespeople, interactions, and more.
Bottom-up forecasting aims to start from the smallest details of a forecast and build the process around them.
One advantage of a Bottom-up forecast is that if any variable changes (such as cost per item), it is easily changeable. It also provides very detailed information.
A Top-down sales forecast starts by evaluating the total size of that market.
So it goes on with estimating what percentage that company can acquire.
To make a sales forecast, I need to pay attention to the use of the Bottom-up and Top-down methods.
Starting with the Top-down and then continuing with the Bottom-up a to validate if your first estimate is feasible.
But also, you can use each of them separately and analyze how well they perform and agree. A more accurate prediction uses both methods together but also several tests of them separately.
5 Sales Forecasting Examples
Example 1: Sales Cycle Weather Forecast
The first sales forecast example uses data on how much time a lead takes to convert to a customer.
This forecasting using the sales cycle length is an objective method, and your forecasting does not depend on a single subjective factor, such as the instinct of your sales professionals.
It’s a valuable method for companies that always track how and when prospects enter the sales funnel. It is essential that your sales and marketing teams are aligned with each other.
Example 2: Lead-driven forecasting
Lead driven forecasting takes into account analyzing each lead source and assigning a certain value based on similar leads in previous periods and creating a forecast based on that source value.
By assigning value to each of your lead sources, you can see the chances of a lead becoming a customer.
Bearing in mind that this data-driven forecast is susceptible to change.
Example 3: Opportunity Stage Forecast
In this approach, an analysis is made of what level the prospect is in your sales funnel and calculates the chances he has of closing the deal.
A pipeline can be divided into several steps.
Usually, the further away the prospects are, the better the chances of closing the deal.
This forecast happens without taking into account the details of each individual business.
This leaves customers who have been in the testing process for much longer to have the same advantage for success as a prospect who has just joined.
Despite this, it is a technique widely used for its objectivity.
Example 4: Test Market Analysis Forecast
Test market analysis accuracy allows you to deploy your new product/service to a certain group of people based on market division.
It is a very useful method for large companies that are launching a new product and would like to understand the market response.
However, keep in mind that with this method, remember that not all markets are the same, not everything that happens in one market happens in others.
Dealflow: the spreadsheet that helps in forecasting sales.
The dealflow is used to calculate the number of prospects that your business intelligence team will need to acquire so that you can reach the final number of customers expected to reach your goal.
A dealflow is essential for a sales process to function in a structured and complete way.
We created a dealflow spreadsheet that helps you forecast sales.
It is essential for your process to have the best possible predictability.
To use it, it is necessary to insert the variables through the spreadsheet tabs that we developed and, at the end, the dealflow comparison is ready on your screen.