Sales Forecasting – Everything You Need To Know

Last updated on Friday, February 1, 2019

Sales forecasting is a practice that is imperative to your organization’s success and growth. A well-informed, data-driven forecast can help your business reach its sales targets, amongst many other things. This is true for all businesses, big and small. 

By conducting a sales forecast, you can ensure that you take advantage of revenue spikes that lead to sales growth and you can plan for when things take a dip and you need to make changes to your operations. Who could say no to this type of business clarity? Not many people. 

You may have a lot of questions about the practice now. But worry not. In this article, we tell you everything you need to know about it. So if you’re interested in hitting your targets and fostering growth, then read on. 

What Is Sales Forecasting? 

Before we get carried away with the more intricate details, let’s take care of the basics. It can be difficult to tell the difference between various types of forecasting, like sales, billing, and revenue forecasting. While they are all related, they must be distinguished between. Here, however, we will focus on sales only. 

Sales forecasting is essentially an estimate of the number of sales (and thus sales revenue) that an organization will secure in a specific time period. The practice looks at sales in their totality, considering the entire value of closing deals. In more basic terms, it is about predicting your organization’s sales in a specified time period. You can forecast sales for a specific year, quarter, or even week. 

Why You Need Sales Forecasting

Research by the Aberdeen Group shows that sales forecasts help organizations reach 13.4% more year-over-year growth. This should be reason enough to start forecasting your sales. But if you need more reasons, find them below. 

Resources and Inventory 

With an idea of what sales revenues are coming your way, you will know how to best distribute your resources. For example, if you predict a spike in sales for a certain period, you can ensure that you are prepared. 

Additionally, if you have physical products, you’ll have an indication of how much stock you need. This ensures that you don’t waste money on unnecessary storage fees or excess inventory. 


Your organization will have a clearer idea of how much money is coming into your business and when to expect this to occur. This allows for increased strategic financial planning. For example, if you see a potential bump in the road for your profits, you’ll have more time to react. 


Investors take sales forecasts into account when they decide to put money into your business. A positive sales forecast can secure the funding you need. 


Growth depends on planning. With forecasting, you can better predict what’s coming, and ensure that you plan well and do not lose out on opportunities. You’ll know what to do to ensure your pipeline is in shape, and, in general, things will be more predictable. Also, you will know how much marketing needs to be done. 

Steps Before Sales Forecasting (And What Information You Need)

You can’t do anything without the right data. For new businesses, without existing data, this may sound like incoming trouble, but these businesses can simply use industry averages. Here are some steps to follow to ensure you are well prepared before you do your forecasting. 

1. Understand Your Processes 

You must thoroughly chronicle your sales processes. Know what actions are necessary to seal a deal. This will help you to anticipate whether deals in the pipeline will close. 

2. Goal Setting And Benchmarking 

Ensure that you set goals and quotas for each team member and the team as a whole. This will give you insight into whether your forecast was good or not, it also gives your team a definition of success. 

Thereafter, you need to establish the usual duration and performance of your sales process is. You can measure your forecasts against these benchmarks. Here you can factor in things like the average cost of a deal, average renewals, the time it takes to close a deal, how long it takes to generate buyer interest, and so forth. 

3. Know Your Pipeline 

It is imperative to be fully aware of what exists in your pipeline. Your database must always be kept up to date to ensure the most accurate forecasts. Well-organized CRMs are a key to success. 

Sales Forecasting Methods 

Let’s take a look at some of the different methods of forecasting sales. 

Historical Forecasting 

In essence, this method requires you to use historical sales data to predict future sales. Commonly, this method does not consider lead quality or changes in the sales process when creating a forecast. 

Lead-Driven Forecasting 

Using this method, you allocate a value to each lead. This is estimated by considering the likelihood of each deal being closed. Other factors that are taken into consideration here include conversion rates and average sales price on the source of the lead, and sales in the previous time period. 

Multivariable Forecasting 

This is a combination of various other sales forecasting methods. It provides a more in-depth analysis of sales predictions. It takes into account market share, historical sales, pipeline information, and seasonality of sales to establish a forecast. 

Intuitive Forecasting 

Intuitive Forecasting relies heavily on your sales reps. Here, you will require your sales reps to estimate their average success rate in a specified period of time. In other words, they have to predict how many deals they think they will close in a defined time period. This is a good option if you are lacking in data to use, but is often much less accurate than other methods. 

Additional options include opportunity stage forecasting and the list of sales cycle forecasting methods. If you’d like a more detailed list of methods, with the pros and cons of each, we have got you covered, and we also have examples for each method, to help you increase your understanding. 

Sales Forecasting Tools 

So what tools are available to help you to forecast your sales? Quite a lot. Find a list below. 

  • CRM Software – A CRM software, like Salesforce, is essentially a combination of a database and other, more specific, sales tools. It allows you to track leads, see analytics, and create reports. 
  • Sales Analytics platforms – These tools collect and combine data about your products, from which they create forecasts and provide you with analytics. Often, they are in real-time. With these tools, you’ll have a full view of your products, performance, and pipelines. 
  • Microsoft Excel – This is a less tech-savvy way of doing things, and is perhaps better suited to new businesses. It allows you to create useful charts, to gain insights into your sales. 
  • Accounting software – This is another more basic tool to choose from. However, it may come in handy when you forecast gross margins. This is because you’ll need to consider the goods sold, which is data that can be found easily on accounting software.  


Then, of course, we must mention revVana. We provide software that expands on top of sales forecasting tools by forecasting revenue over time based on the timing of expected revenue from products and services in a company’s pipeline. revVana helps you plan and maximize your revenue throughout the sales-to-revenue process. 

Final Thoughts 

Now that you have all the information on sales forecasting, and you can see all the benefits it can bring, why not get started immediately? With revVana, the process will be easier than you expect. Secure your future growth with sales forecasting today.