How to Calculate Sales Forecast

How to Calculate Sales Forecast

Sales Forecast

A sales forecast is a very important part of leading your business to success. It is the backbone of the business which keeps it motivated and going. The success of a business is measured by its growth in sales, and sales forecast predicts the expenses, profits and its growth. It is an estimated benchmark that a business can think of achieving. It is not a target or an accurate number which requires any complicated calculations. You do not need a degree to create a sales forecast, and anyone who runs a business can do it on their own with educated guessing.

A sales forecast is usually done for a year with a forecast for each month and then for the following two to five years. If a business has more than one product, each product will have a different forecast, and then there will be an overall forecast for the entire organization. It is not an accounting method but a business planning method. Hence it doesn’t require the exact numbers and can be achieved easily with these tips.

Develop a unit sales projection

sales projection

You can break down each segment of your sales and get an estimated number for each month. Most of the companies who sell products measure their sales for units, unlike the software provides and service providers. Product-based companies can have a sale forecast in a much easier way than the service providers.

Use previous sales

You can make a forecast based on your previous sales. You can use the data from your recent sales and project it forward into the future. You can predict your sales in the future based on your sales in the past instead of tracking your sales in future.

Use factors for new product

new product

If you have a new product on the market and have no past sales, it is still possible to predict future sales. You can study the past sales of similar products in the market to find a probable estimate. As it is not related to accounting, even wrong predictions will cause no harm, so it is okay to dream big and motivate your marketing team.

Project the prices

While making a sales forecast, it is also important to predict the prices. For all unit sales of 12 months, you must also project the price you are expecting. You need to set a cost for your product as it will provide the estimate for the profits you will be making. You can also increase the cost in the projection if you expect to reach a target. Keep track of how much you are paying for the product and how much you are selling it for. Use a spreadsheet to record all the data for 12 months and choose the decisions which suit best for your business in the coming months.