Sales forecasting: what it is and how to create an accurate sales forecast

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Sales forecast is an estimate of expected sales income within a specified time frame

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Sales forecasting: what it is and how to create an accurate sales forecast
Sales forecasting: what it is and how to create an accurate sales forecast
Sales forecasting is one of the most important things a company does, as it feeds sales planning and is used throughout the enterprise for recruitment and budgeting, and while it is important, many organizations use outdated practices that lead to poor forecasts, what is the concept of sales forecasting, and how can accurate sales forecasts be created?, Questions we will learn about their answers in this article.

What is sales prediction?

Sales forecasting is the process of estimating a company's sales revenue for a specified period of time - typically a month, quarter or year, and sales projections are predicting how much the company will sell in the future.
Setting up sales prediction is vital for business success, as both hiring, salaries, compensation, inventory management and marketing depend on it, in return public companies can quickly lose credibility if they miss expectations.
Sales forecasting goes hand in hand with sales line management, and getting an accurate picture of qualifications, engagement and speed for each sales reps and managers transaction certainly helps to provide data for reliable sales forecasts.
Sales forecasting

Sales Prediction Benefits 

There are many benefits to forecasting sales, getting accurate sales forecasts, including:
  • Accurate sales forecasting allows better decisions on stock levels, staffing needs and inventory budget, contributing to improved decision-making.
  • Forecasting sales helps companies save money by avoiding overproduction or underproduction of goods and services.
  • By predicting future sales, companies can ensure they are ready to meet customer demand
  • Forecasting sales helps companies meet customers' needs and expectations.

How to create an accurate sales forecast 

Sales forecasting differs from sales targets. The latter is the organization's hope to achieve, while sales forecasting uses a variety of data points to be accurate sales forecasting for future sales performance. The following are steps that will contribute to achieving accurate sales forecasts:

1. Use of historical data

Historical data analysis provides an excellent baseline for setting sales forecasting targets, where you can study future growth potential, taking into account time-sensitive market factors, economic conditions, competitor research, consumer behavior, and new legislation.
It is true that past sales are not always accurate predictions of future performance, this year you may introduce new products, expand into new markets, face an increase in competition, etc., yet historical data is a solid foundation you can stand on, which you can weave into your presentation of fixed numbers for your final expectations.

2. Determine what you sell with prices and quantity

This step may seem obvious, but forecasting comprehensive sales, requires you to select each item you sell, excluding an item you sell or including an item you no longer produce may lead to inaccurate forecasts of sales, so you should know what you sell, also specify your sales prices and the number of sales you expect to happen.

3. Start with a simple model

Using something as simple as a downhill sales prediction model, for five of your team's most popular sales activities, is a better model than a model that combines seasonality, time chains and sales forecasting with demand, why? Since the fewer variables you have to track, the easier it will be to achieve your sales goals.
Also, you should explain to salespeople how targets were set this way, get leadership approval for your expectations, and once you've determined how well your sales prediction model works for the first year, you can update it the following year with variables of another type of model.

4. Implementation of sales pipeline action plan

For sales customers, quality is more important than quantity, while expected customer quality can certainly affect their convertibility, as increasing the number of expected customers usually increases the number of closed deals.
That's why you should build a business plan to generate the minimum number of necessary expected customers, for example, if you know that your representatives have closed 25% of their deals from well-qualified expected customers, you may aim to create twice as many well-qualified potential customers in the next quarter, ideally, your representatives will close 30-50% more deals.
No matter what your numbers should look like on the closing side, place the same level of focus on forecasting sales and generating potential customers, understand your conversion rates at every stage of your sales conversion path, and then plan accordingly.

5. Documentation of sales operations

How the sales team deals with customers varies greatly depending on what the company offers and who its potential customers are, as such, it is necessary for companies to document the different stages of their sales cycle.
When companies understand every step of their sales process and review their current sales trajectory, it becomes easier to capture data and identify potential problems and future opportunities.

6. Use forecasting tools

You can save a lot of time (and improve the accuracy of your expectations) by using a tool developed only to predict sales, where sales reporting tools include a prediction report based on your sales pipeline plan along with current transaction data to provide an expectation based on the likelihood of closure.

7. Integration of "what if" and qualitative data

Many companies fail to plan new sets of data to track and overlook qualitative data, and instead of constantly looking at the same numbers and making bold predictions, companies should ask "what if" questions that can be answered once more data is collected.
Looking at your business from different angles gives you new insights, for example, if you're trying to boost sales for many products on your ecommerce site, why not keep track of how many customers are buying a selling product in two different categories? Understanding where customers are attracted to certain items, and items that are well paired together can give you inspiration for new product promotions and special offers.
Qualitative questions associated with quantitative tracking can help you better understand your business and make smarter decisions, this is how you can integrate sales prediction into other business goals, such as redesigning a store or testing advertising campaigns.


Sales are your company's lifeblood, and from this point of view sales prediction should be included in the list of priority things to do in your company. Without the sales expectations on which your business plans will build, you will be hard pressed to develop cash flow expectations, production plans or even HR plans (among others).

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