Simple Sales Forecasting – A Useful Tool

by Ed Martin

Want to know how your business is doing? Look at your sales. But for them to make any sense you need to have something to compare them to so you can measure how you are doing. That is where a sales forecast comes in.

Making a sales forecast isn’t hard, especially when you understand you don’t have to be exact. Close enough is good, and it is not that hard to do with a little thought and maybe a spreadsheet.

Getting Started
The trick to forecasting is actually to get started. Don’t be afraid about being wrong because you can revise your forecast whenever need, which will probably be every month for a while.

You will want to start out forecasting your sales by month for the next 12 months. You can go out farther and do it by years for the next few years, but don’t expect it to be too accurate. That is why it is good to use a spreadsheet. It’s easy to change.

If you have past sales data, then you’ve got a good place to start. If your business is new, you’ll have to make some guesses, do a little research and see what others are doing. Check with the Small Business Administration, your local chamber of commerce and other entrepreneurial organizations. Give it your best shot and remember to come back later and update.

But How Do I Do It?
Enough already, what do you have to do? Simple. Here’s how I made a simple forecast.

I started out with columns for the next 12 months, a total for the year and a final column for next year. Go out as far as you want as long as you understand that you get less accurate the farther out you go.

Next I made a section for my unit sales. I listed 2 lines, widgets and gadgets. You can make as many or few as you need. Group things however makes sense for your business. If you have past data, use it, or make the best estimate you can.

Then I made a section for unit price, how much I sell each widget and gadget for. If you know you will have a price increase or reduction, factor it in here.

I broke out the sections like this so that I can multiply unit sales X unit price to get my monthly sales for each product line and keep everything separated. It is easier to make revisions this way.

Finally I have my Total Sales for the month and the year. I don’t have to be 100% accurate, just reasonably close and I can always revise.

You can even get a little fancier and make a rolling 12 month forecast, add some nice charts and graphs, add another section to show actual sales and so on. None of this is very hard with a spreadsheet once you understand the basics.

The sales forecast gives you a quick gauge of how your business is performing. If you are beating your forecast, great! Figure out why. If you are underperforming, you will see it and can start working on the problem. The most important thing is that you actually do make a forecast and then revise it.

signature

You can always contact me at MicroBizMadeSimple.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Previous post:

Next post: