Table of Contents
There’s a lot of talk these days about how to forecast sales. If you’re wondering what the best way for your business is, this blog post should be able to help you out !!!
The “sales forecasting tools free” is a guide that will help you understand how to use sales forecasting. It has templates, which are free.
Sales forecasting estimates the revenue and number of customers your company intends to produce over a certain period of time. There are many methods for creating these estimations, which allow you to better prepare for budgetary demands and company development. We look at the goal, advantages, techniques, and process for forecasting projected revenues in this post, as well as provide Templates for Sales Forecasting for Free that you can adapt for your company.
Templates for Sales Forecasting for Free
While many customer relationship management (CRM) software products offer built-in forecasting tools, your CRM might not, or your business may not yet be using formal CRM software. In either case, here are two Templates for Sales Forecasting for Free you can download to create a one-year or multi-year report:
Our One-Year Sales Forecast Template is available in PDF and Excel formats.
Our Multi-Year Sales Forecast Template is available in PDF and Excel formats.
What Sales Forecasting Is & What It’s Used For
Based on historical performance, sales trends, sales possibilities, pipeline conversions, and anticipated marketing initiatives, sales forecasting anticipates future revenue. It’s mostly utilized by business owners, executives, and salespeople to figure out how big their company will expand or how much money they’ll have to spend.
Let’s imagine a company wants to discover how much accessible money they’ll need to spend in expanding by opening a new location. To do so, they’d take into account their existing spending capacities as well as the predicted cash flow from income growth. This is referred to as the cash flow by revenue figure, and it is derived by a sales projection.
The Advantages of Forecasting
Estimated revenue projections are critical to include in your sales strategy if you want your company to expand. The information gained through sales forecasting is very useful for budgeting, creating personnel incentives, and developing a company. The following are some of the most significant advantages of forecasting future sales:
- When you apply for a business loan, it may help with commercial lending underwriting.
- Determines if you have the capacity to expand, recruit additional people, or open new sites.
- Establishes a structure for paying and rewarding salespeople via incentives and promotions.
- Over a specific length of time, determines overall spending or investment capacity.
- Gives you the chance to see how marketing efforts could function in the future.
Creating a sales forecast also helps you to set achievable company objectives. These objectives have a significant impact on how a company’s sales operations generate leads, maintain client relationships, and conclude sales transactions.
Methods for Predicting Sales
Inputing elements into an algorithm to get a sales prediction is what forecasting implies. Internal variables like as historical sales, present opportunities, and marketing efforts impact the projections provided, depending on the sales forecasting approach you select. External issues such as the economy, market competitiveness, and seasonality must also be considered.
The main types of Methods for Predicting Sales:
Trends in History
This sales forecasting method takes data from previous time periods, accounts for new factors such as growth or increased demand, and calculates projected sales revenue. While this method is ideal for businesses at least a few years old, new businesses could also use Trends in History by evaluating information from other businesses similar to their own. Let’s take a look at an example of using Trends in History to make a forecast.
The ABC Online Store generated $100,000 in income last year, with 2,000 customers and 60,000 online visitors. They hope to grow site traffic to roughly 80,000 visits in the coming year, based on their marketing strategy. ABC Online Store may anticipate revenue of $120,000 if each new client spends the same average of $50 per transaction and the conversion rate of 3% stays constant.
120,000 = (80,000 * 0.03) * 50
Let’s pretend the company wishes to forecast how well they will do during their peak season. In previous years, they had gathered 40% of their sales during the fourth quarter holiday seasons (October to December). They had sold $80,000 in the first nine months of the year. They may estimate total revenue for the year to be $133,333, with $53,333 in Q4 alone, based on their constant share of revenue earned in Q4.
1-0.4 = 0.6, 80,000/0.6 = 133,333, 133,333 * 0.4 = 53,333, 133,333, 133,333, 133,333, 133,333, 133,333, 133,333, 133,333, 133
Let’s now reverse the factors of the available historical data. Consider this scenario: ABC Online has routinely made 15% more than the preceding year after five years in operation. There is also a 10% rise in demand in the whole market. ABC may anticipate a rise of $22,500 (150,000 * 15%) owing to ordinary growth, as well as an extra $17,250 due to increased demand, for a total of $189,750 if they did $150,000 last year.
150,000 * 0.15 = 22,500; 150,000 + 22,500 = 172,500; 172,500 * 0.1 = 17,250; 17,250 + 172,500 = 189,750; 172,500 * 0.1 = 17,250; 172,500 + 172,500 = 189,750
Forecasts are included in many CRMs’ sales reporting tools. Pipedrive, for example, examines revenue records from previous periods and forecasts future revenue based on growth expectations and present open prospects.
Forecasting reports from Pipedrive (Source: Pipedrive)
Forecasting based on conversions
A sales process that follows conversion rates of a sales pipeline or funnel can use Forecasting based on conversions to estimate anticipated revenue. This method is more common in business-to-business (B2B) sales, which are usually finalized in the form of deals.
If a conventional sales cycle is followed for completing agreements, this strategy may also be used by business-to-consumer (B2C) firms. It may be used by ecommerce organizations that measure website traffic, browsing, and purchase rates.
Let’s look at ABC Management Consulting as an example. They want to forecast income based on transactions, deal valuations, and sales funnel conversion rates. They presently have 200 leads in the funnel going into the new year, and they intend to produce 50 additional leads during the course of next year’s campaigns. The entire possible transaction value is $6,000,000, and the conversion rates are as follows:
- 16 percent of those who are aware of the brand are interested in learning more about it.
- 50 percent of those who are interested in obtaining information are also interested in receiving an offer.
- 60 percent of those who received an offer to consider/negotiate that offer
- Considering accepting the offer/closing the transaction 75%
ABC thinks that 40 (16%) of the 250 total leads will be interested in additional information based on this information. Twenty percent (50 percent) of those interested want to receive an offer through proposal, and 12 percent (60 percent) want to seriously examine the offer by discussing some of the parameters. In the end, ABC expects nine of the leads to become customers, resulting in a total transaction value and revenue projection of $216,000.
Next, let’s look at Forecasting based on conversions for a B2C ecommerce company. Using industry averages and their internal marketing knowledge, ABC Online believes their digital campaigns will reach 2,000,000 views (awareness) over the next 12 months and get 10% to click and view the online store (interested). From the website, 30% will likely browse for a solid amount of time (consideration) and 5% of those will actually make a purchase (decision).
Assume that each purchase is for a single unit of what is being offered for $100. According to this, 3,000 transactions will be made, bringing in a total income of $300,000.
Use your CRM software to measure conversion rates in the sales pipeline or funnel stages. For example, Zoho CRM displays conversion rates based on data recorded in your CRM system, such as the number of leads and phases of each lead. The data is shown on Zoho’s dashboard and may be further broken down by lead location, sales stage, and lead source.
Metrics for Zoho CRM’s pipeline and funnel conversion (Source: Zoho)
Knowledge of Sales Reps
Because it doesn’t utilize real historical data or conversion rates, this sales forecasting approach is the least accurate. Instead, you rely on your sales team’s performance expectations, market information, and confidence to forecast the amount of transactions they’ll complete or leads they’ll generate.
This method’s accuracy will always be questioned since sales people, particularly to their bosses, want to be positive about what they anticipate to close. Ideally, you’ll only utilize this strategy in combination with one of the others or when there are no other options for forecasting income.
If XYZ Company is conducting a sales meeting with their sales representatives, this strategy might be utilized in a simple manner. The manager looks through a list of fresh business prospects and asks each salesperson in charge of that lead to provide their degree of confidence in sealing the contract and how much they think it will be worth. The following are the responses:
- Opportunities:
- Deal 1: For $50,000, you have a 30% chance of winning.
- Deal 2: For $20,000, you have a 50% chance.
- Deal 3: For $5,000, you have a 90% chance.
- Deal 4 for $60,000 with a 40% probability.
- Deal 5 for $40,000 with a 30% probability.
- Deal 6 for $70,000 with a 20% probability.
- The following are the predicted deal values, according to their responses:
- Deal No. 1: $15,000 (30% of $50,000)
- $10,000 (50 percent of $20,000) is the second deal.
- Deal number three is $4,500 (90 percent of $5,000).
- Deal #4: $24,000 (or 40% of $60,000).
- Deal No. 5: $12,000 (30% of $40,000)
- Deal No. 6: $14,000 (20% of $70,000)
In this scenario, the overall sales estimate for new company is $79,500. It’s the sum of the predicted contract values ($15,000 + $10,000 + $4,500 + $24,000 + $12,000 + $14,000 + $14,000).
This strategy might potentially be less probabilistic, relying just on “close” or “won’t close” criteria. Instead of asking for confidence levels, a manager may simply inquire about the projected value and if the representative believes it will be closed within the time range. This strategy has the advantage of motivating your sales people to prioritize finishing transactions, particularly those in which they stated a high degree of confidence that it will close.
How to Make a Forecast in 5 Simple Steps
Taking data you currently have (previous sales, normal conversion rates, or predicted deal prices) and plugging it into a mathematical formula is a big part of projecting future income. Once you’ve created a formula, all you have to do now is enter in various numeric elements to get income calculations.
In five easy steps, you can create a sales forecast:
1. Choose the most effective method
Your sales operation and offerings determine which forecasting method you should use. For instance, if your business is an ecommerce company that sells to consumers, either use Trends in History or use the conversion-based method with online metrics that offer conversion rates for potential customers who click and navigate your website.
On the other hand, B2B businesses that treat every lead as an opportunity or deal in the sales pipeline should use Forecasting based on conversions or Knowledge of Sales Reps to obtain revenue estimates. If you sell B2B services but generate sales through ecommerce, such as downloadable software products, use the online conversion-based method or historical data trends.
2. Collect Information & Data
Whatever approach you select, you must first obtain and arrange the data required to carry out that method. You’ll need data from prior years for sales revenue, units sold, transactions concluded, growth percentages, seasonality patterns, and historical demand to use the historical trend approach.
For Forecasting based on conversions, seek out information based on current opportunities in the pipeline, industry averages, or intelligence from experienced sales staff to estimate pipeline or funnel conversions from stage to stage. For using Knowledge of Sales Reps, pull information on current opportunities and find out from your sales team which ones are the most promising.
CRMs make it simple to maintain and obtain the data required for sales forecasting. For example, with Salesforce, you can establish opportunity profiles to monitor where an opportunity is in the sales process as well as the potential transaction value. This data may be used to generate conversion and revenue estimates reports.
Opportunity record in Salesforce with stage and value (Image courtesy of Salesforce)
3. Create a Forecast Equation
Once you have the information required, you are ready to create a usable forecasting equation. The layout for each equation will vary depending on the method you’re using and the information you already have. For example, if you’re using Trends in History and know the growth rate you expect to see, the equation would be:
Previous Year Revenue * (1 + Estimated Growth Percentage) = Estimated Revenue
Add each of the steps and conversion percentages to an equation as follows to get the number of sales closed or new clients using conversions:
Total Sales Opportunities * # of Deals Closed * (Stage 1 Conversion Percentage) * (Stage 2 Conversion Percentage) * (Stage 3 Conversion Percentage) *… * (Stage 1 Conversion Percentage) (Final Stage Conversion percent )
You could still draw up an equation based on your sales people’ confidence % levels if you leverage their knowledge:
Estimated Revenue = (Deal 1 Estimated Value * Confidence Percentage) + (Deal 2 Estimated Value * Confidence Percentage) + (Deal 3 Estimated Value * Confidence Percentage) +…. + (Last Deal Estimated Value * Confidence Percentage) +
4. Incorporate your information into your equation.
The data you gathered in step two will be entered into the algorithm to generate a sales estimate. This is how the equations appear with sample quantitative information added to them, using the example equations from the Methods section above:
- Trends in History: Estimated revenue = $150,000 * (1 + 15% annual historical average growth)
- * (16 percent lead qualifying rate) * (50 percent proposal/offer delivery rate) * (60 percent negotiation rate) * Conversion-based: Number of Deals Closed = 250 leads presented * (16 percent lead qualification rate) * (50 percent proposal/offer delivery rate) * (60 percent negotiation rate) (75 percent deal won rate)
- Knowledge of Sales Reps: Estimated revenue = ($50,000 * 30% confidence) + ($20,000 * 50% confidence) + ($5,000 * 90% confidence) + ($60,000 * 40% confidence) + ($40,000 * 30% confidence) + ($70,000 * 20% confidence)
Note: The numbers in the instances above are from ABC Online and XYZ Company.
5. Work out a sales forecast
You’re ready to compute your estimations after you’ve added the numbers to the equation. It’s worth noting that whether your equation is used to figure out how many transactions were completed, how many customers were generated, or how many products were sold, you’ll need to take an additional step to figure out how much money you’ll make. This entails multiplying your results by an average value per contract, sales per transaction, or price per unit.
The following are the anticipated revenue totals based on the preceding equations:
- Trends in History: $172,500 Estimated Revenue = $150,000 * (1 + 15%)
- 172,500 = 150,000 * 1.15 = 172,500
- * (16 percent lead qualifying rate) * (50 percent proposal/offer delivery rate) * (60 percent negotiation rate) * (75 percent deal won rate) 9 Deals Closed * $30,000 Average Deal Size = $270,000 anticipated revenue
- 9 = 250 * (0.16) * (0.50) * (0.60) * (0.75) = 270,000 9 * 30,000 =
- Knowledge of Sales Reps: $79,500 Estimated Revenue = ($50,000 * 30% confidence) + ($20,000 * 50% confidence) + ($5,000 * 90% confidence) + ($60,000 * 40% confidence)+ ($40,000 * 30% confidence)+ ($70,000 * 20% confidence)
- 79,500 = (50,000 * 0.30) + (20,000 * 0.50) + (5,000 * 0.90) + (60,000 * 0.40) + (40,000 * 0.30) + (70,000 * 0.20) + (60,000 * 0.40) + (40,000 * 0.30) + (70,000 * 0.20)
Conclusion
Sales forecasting is determining a future result using data you already have. These figures are very valuable for budgeting and growth projections. CRM software is often used to forecast revenue since it already stores past sales data and conversion rates. If you don’t have a CRM, you may conduct your forecast using our free templates or step-by-step procedure.
The “sales forecast excel” is a spreadsheet that can be used to create a sales forecasting. The spreadsheet includes the formulas and templates for creating the forecast.
Related Tags
- market forecast template
- 12-month sales forecast example
- sales forecast generator
- sales forecast template google sheets
- sales forecast template word
