Your guide to easy and accurate sales prediction (2023)

Sales prediction has been around for as long as people have been selling things. After all, it’s essential for planning — you don’t know how much to invest in your business product if you don’t know how much you might sell.

In recent times, sales prediction has often taken the form of complex spreadsheets. Luckily, there’s a better way. This article will discuss how you can make easy, automated sales predictions — and how monday.com can help.

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What is sales prediction?

Sales prediction — also commonly called sales forecasting — is the process of estimating future sales by predicting the amount of product or services an individual salesperson, a sales team, or a company is likely to sell in a fixed time period i.e. next week, month, quarter, or year.

There are a lot of different methods for predicting sales, but the important thing is that they’re all backed by some kind of data. Sales prediction allows you to replace gut feelings with evidence-based decision-making.

What are the benefits of sales prediction?

You’re going to do your best to close deals no matter what. So why do you even need to forecast the results?

The truth is that predicting sales revenue comes with big benefits. With a good forecasting technique, you can:

1. Evaluate sales performance

If you estimate that you’ll close $2 million worth of deals in Q1 and you only bring in half of that, you have one of two problems:

  1. Your sales prediction formula is off
  2. Some issue is causing your team to underachieve

Either way, you’re alerted to the situation and can investigate further. You might identify ways that you could improve your sales processes. Or you might discover that a particular member of your team isn’t putting in the work. Starting with a clear target lets you find and fix problems early.

2. Plan effectively

This is the biggest reason to forecast sales performance. A lot of planning goes into a successful sales cycle, and sales prediction can help you get the plan right to achieve your goals. Let’s take a look at a few areas where this can have a positive impact if implemented correctly.

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Inventory management

If you’re selling a physical product, your sales forecast will be important in deciding how much inventory you need and which items to stock. Proactive inventory management based on sales projections keeps your company from overstocking or understocking.

Budgeting

Accurate projections help you balance cost and revenue. Use your forecast to predict the funds you’ll have available for investments that grow the business, like new technology or training.

Your guide to easy and accurate sales prediction (1)

Setting targets

When you determine sales goals for your team or individual representatives, it’s important to choose numbers that are ambitious but attainable. You could guess where that line lies, but basing the decision on data is better.

Sales reps are often highly motivated people who are eager to exceed a quota. But if you ask them to sell more than is realistically possible, they’re likely to lose enthusiasm. Other causes of poor morale that you can avoid with sales predictions: overpromised raises or bonuses, work delays due to a lack of funding, and unexpected layoffs.

Planning team size

A sales prediction lets you see how many salespeople it will take to handle all of your deals. If you have an accurate forecast, you can onboard new team members with plenty of time to train them. Your forecast will also help you distinguish seasonal trends and other regular ups and downs, so you can hire temporary staff if needed.

3. Make decisions with confidence

A sales leader needs to be able to make strategic decisions quickly and confidently — that’s a lot easier if they’re not flying blind.

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Sales predictions provide key data so that you and your team can feel good about the decisions you make. However, according to a Gartner survey, only 45%of sales leaders have high confidence in sales prediction accuracy.

Your guide to easy and accurate sales prediction (2)

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The same report goes on to say that the solution to this lack of confidence is simply to track and communicate the accuracy of the predictions.

If you’re forecasting sales, you should also be evaluating the accuracy of your projections regularly so that your sales teams know they can trust the data.

We’ll detail how you can use monday.com Work OS to create reports and more for confident and data-driven decision-making.

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How do you calculate sales predictions?

Now that we all agree that sales predictions are essential, we just need to figure out how to make the forecast. There are a couple of ways to do this — hint you can do both on monday.com sales CRM.

Historical forecasting

This method is the simplest. Historical sales predictions base the forecast on previous years’ data. For example, if you made $600,000 last April, you could predict that you’ll make the same this April.

Or you could factor growth into that estimate. You made $600,000 last April, and you expect to grow by 4% year-on-year, so you’ll make $624,000 this April. This method is popular because it’s easy and can provide a relatively accurate forecast — assuming your sales don’t change much from one year to the next.

But historical forecasting doesn’t allow for very many variables. For a more nuanced estimate, try opportunity stage forecasting.

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Opportunity stage forecasting

This forecasting method is a little more complicated, but you still don’t have to be a math genius to figure it out. Think about your sales pipeline. Most new leads will never close. But once the deal makes it to the negotiation stage, your odds are much better.

The close probability for each stage might look like this:

  • Lead: 10%
  • Proposal: 45%
  • Negotiation: 70%
  • Contract: 95%

Next, you apply these percentages to the value of your deals.

If you have a $100,000 deal in the negotiation stage, take 70% of $100,000 and add that number to your total sales prediction.

Deal value x close probability = sales prediction

What factors impact your sales forecast?

But wait, how do you calculate the close probability for each stage?

The possibilities are endless — you can decide for yourself which factors to consider when making sales predictions. Some possibilities include:

  • Historical data: In the past, how often have deals closed after reaching each stage?
  • Sales and marketing spend: You can assume that the more you spend, the more likely the deal is to close
  • Competitive landscape: Deals with more competitors are less likely to close
  • State of the industry: How often are people buying products like yours these days?
  • Product changes: If a product is updated or a new product is introduced, your success rate might change with it
  • Internal factors: Process changes, hirings and firings, new investors, etc.
  • Seasonality: Do you sell more in the summer or winter?

Sales prediction with monday.com

If the process of projecting sales sounds complicated or just plain tedious, don’t worry — monday.com can make it much easier and even take some of the work off your hands.

Here’s how.

1. Start with the CRM template

If you’re not using it yet, start by getting monday.com’s CRM template. You don’t need to change anything about the template to make sales predictions, but it is fully customizable to meet your business needs.

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2. Enter deal information

Go to the Sales Pipeline board and start entering your deals. You can put a lot of information into the CRM, but for the purposes of your sales prediction, the important thing is that you include a deal value and a close probability for each. At this point, you’ll have to enter your close probability manually for each deal. You can do this manually or import directly from an Excel file.

You could generate quality predictions with this sales forecasting method, but you’re wasting time typing in percentages for each stage of each deal.

Your guide to easy and accurate sales prediction (3)

3. Bonus: use monday.com automations

You can automate a change in the close probability for a deal when the deal moves to a new stage. Click on Workflows on the upper right of the board to see your active automations or to add a new one from the Workflows Center. For each stage in the sales pipeline, you can create an automation that changes the close probability.

For example:

When Stage changes to Negotiation set Close Probability to70

Now, every time you move a deal to the negotiation stage, the deal’s close probability — and your entire sales prediction — will update to 70% automatically.

Feel free to get creative. monday.com automationsare flexible, and if your sales prediction secret sauce is based on factors we haven’t covered in this article, you can probably work those into the formula, too.

4. Check out your Sales Dashboard for an up-to-date sales prediction

Ready to see the results of your 5 minutes of hard work?

Switch over to the “Sales Dashboard,” and there it is, your forecasted sales revenue.

Your guide to easy and accurate sales prediction (4)

Keep an eye on the accuracy of your predictions and tweak as needed.

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Data-driven sales projection

Accurate sales forecasting is complex, but it doesn’t have to create a lot of extra work for you.

A few clicks in monday.com, and you’ll be well on your way to evidence-based sales planning. Get started with sales predictions using the CRM template.

FAQs

What is the easiest methods of sales forecasting explain your answer? ›

Straight-Line Method (aka Historical Growth Rate)

This is the simplest of all the methods to calculate future sales and factor any growth into the equation. Straight-line forecasting is sometimes referred to as the historical growth rate and can give you a rough look at where sales will be based on past growth rate.

How do you make an accurate sales forecast? ›

How to Improve Your Sales Forecasting
  1. Use historical data.
  2. Keep clean records.
  3. Start with a simple model.
  4. Implement a sales pipeline action plan.
  5. Use forecasting tools.
  6. Incorporate 'what ifs' and qualitative data.
  7. Consider seasonality as a factor in sales forecasting.
  8. Encourage collaboration between all departments.
15 Nov 2021

What is the best model for sales prediction? ›

3. Causal models. If you've already extracted historical data and performed the analysis necessary to explain the relationship between different factors—such as business, economic and socioeconomic—you can build a causal model. Causal models are the most sophisticated sales forecasting techniques.

What are the 4 steps in calculating projected sales? ›

Build an Actionable Sales Forecast With These 4 Steps:
  • Align the sales process with your customer's buying process.
  • Define each stage of the sales process.
  • Train your sales team.
  • Analyze the pipeline.

What is a sales forecast example? ›

If the size of a market is $500 million, for example, a company may estimate they can win 10% of that market, making their sales forecast $50 million for the year.

What do you think is the easiest forecasting methods? ›

#1 Straight-line Method

The straight-line method is one of the simplest and easy-to-follow forecasting methods. A financial analyst uses historical figures and trends to predict future revenue growth.

Why is it important to accurately forecast sales? ›

An accurate sales forecast allows companies to efficiently allocate resources for future growth and manage their cash flow. Sales forecasts help set benchmarks for future trends and allow leaders to course correct early. Revenue leaders can align sales quotas and revenue expectations and optimize for more wins.

Why is accurate sales forecasting important? ›

Sales forecasts help businesses make better decisions based on future revenue, which will help them to: Forecast likely profit (or loss) in a designated period. Organize staffing levels and create HR plans. Plan the required level of production needed to meet demand.

How do you explain forecast accuracy? ›

Forecast accuracy is the degree to which sales leaders successfully predict sales (in both the long and short term). Accurate sales forecasts are essential for making key decisions about short-term spending and deals for key accounts.

What 3 factors affect sales forecasting? ›

Some of the most common factors affecting sales, and thus should be taken into account when creating the forecast include: Marketing spend. Budget allocation. Economic conditions.

What is the key metric to predict sales? ›

Quota Attainment

It can be measured per month, quarter or year, depending on your sales cycle. This is an important sales forecasting metric to monitor in order to keep track of how deals have closed against targets as well as to identify reps who might benefit from more coaching or guidance.

What are the 5 stages of sales? ›

There are five general sales cycle stages, but the details may vary from business to business and industry to industry. Most businesses follow the following sales process steps: Prospecting, Qualification, Consideration, Decision, Closing, and Referral.

What are the three methods of sales forecasting? ›

The three sales forecasting techniques include: Qualitative techniques. Time series analysis and projection. Causal models.

How can I forecast my sales? ›

How to Forecast Sales
  1. Establish a sales process for your team.
  2. Set individual and team quotas.
  3. Invest in a CRM.
  4. Choose a sales forecasting method.
  5. Include data from other organizations such as Marketing, Product, and Finance.
  6. Review prior sales forecasts.
  7. Keep your sales team informed and accountable.
4 Aug 2021

How do you forecast sales for a new product? ›

The most common forecasting method is to use sales volumes of existing products to forecast demand for a new one. This method is particularly useful if the new product is a variation on an existing one involving, for example, a different colour, size or flavour.

What is a sales forecast plan? ›

A sales forecast is an expression of expected sales revenue. A sales forecast estimates how much your company plans to sell within a certain time period (like quarter or year). The best sales forecasts do this with a high degree of accuracy.

Which is the most accurate forecasting method and why? ›

A causal model is the most sophisticated kind of forecasting tool. It expresses mathematically the relevant causal relationships, and may include pipeline considerations (i.e., inventories) and market survey information. It may also directly incorporate the results of a time series analysis.

Which type of forecasting is more accurate and why? ›

Short-term forecasts are generally more accurate than long-term forecasts. Forecasting process includes consideration of factors which can influence future demand. Hence, the short-term factors are more predictable than long-term.

How do you forecast sales for a new product with no history? ›

By using Predictive Analytics, you can produce more accurate by-SKU-by-store demand forecasts even when you have no sales history. Predictive Analytics automatically generates a forecast based on a new product's attributes rather than on the product as a whole.

How can you make a forecast more accurate and reliable? ›

Create Realistic, Accurate Forecasts
  1. Begin With Your Baseline. Accurate forecasting is built on an accurate base. ...
  2. Focus On Key Factors. When forecasting, focus on the most meaningful data.
  3. Build From the Bottom Up. When making forecasts, you could work from the top down or the bottom up. ...
  4. Use Good Tools and Be Thorough.

What is an important factor in sales forecasting? ›

Just as a forecasting can only inform you about the weather but cannot change it. The most influential factor is the competition, where the competition stands in terms of market share, new line of products, recognition of brand, expansion or contraction of the sales force, etc.

What are the main characteristics of accurate forecast? ›

Some important features or characteristics of forecasting are as follows: Forecasting is strictly concerned with future events only. It analysis the probability of a future event or transaction occurring or happening. It involves analysis of data from the past and the present.

What is forecasting in your own words? ›

Forecasting involves making predictions about the future. In finance, forecasting is used by companies to estimate earnings or other data for subsequent periods. Traders and analysts use forecasts in valuation models, to time trades, and to identify trends. Forecasts are often predicated on historical data.

What is an example of forecast? ›

Forecasts often include projections showing how one variable affects another over time. For example, a sales forecast may show how much money a business might spend on advertising based on projected sales figures for each quarter of the year.

What are the 3 most important aspects of sales? ›

Being successful in sales and learning how to become better at sales boils down to 3 things: empathy, a genuine desire to help, and persistence.
  • Empathy. ...
  • A genuine desire to help. ...
  • Persistence.
19 Mar 2018

What are the three most important components in sales? ›

There are three key elements that make up a successful sales development organization: people, process, and tools.

What are the 2 main methods of forecasting? ›

There are two types of forecasting methods: qualitative and quantitative. Each type has different uses so it's important to pick the one that that will help you meet your goals.

What is the best approach evaluating sales performance? ›

Here are 5 ways you can evaluate sales reps more fairly and effectively and look at the whole picture of what they bring to your team:
  1. Measure process, not just final results. ...
  2. Promote good prospectors. ...
  3. Reward training. ...
  4. Recognize teamwork. ...
  5. Think about the next deal.

What are the 4 pillars of selling? ›

There are 4 pillars to What to Sell; Industry, Customer Personas, Product and Competitive Analysis.

What are the 4 types of selling? ›

The four types of selling
  • Transactional selling.
  • Solution selling.
  • Consultative selling.
  • Provocative selling.

What is the most important step in selling? ›

The Needs Assessment

This is arguably the most important step of the sales process because it allows you to determine how you can truly be of service. To be a highly effective salesperson, that is to sell to the prospect's needs, you first have to understand what those needs are.

What are the 3 pillars in sales? ›

A healthy, high performance sales team needs to be built on three pillars — compensation, competition, and camaraderie. These are three simple yet measurable foundations that, when built upon, will inspire your sales team to maintain the highest level of productivity and performance regardless of circumstance.

What are the 5 C's of sales? ›

In today's market environment, effective selling involves building trust through the use of five C's: conversation, curiosity, collaboration, customization and coaching.

What is the most simplest type of forecasting? ›

Passive demand forecasting is the simplest type. In this model, you use sales data from the past to predict the future. You should use data from the same season to project sales in the future, so you compare apples to apples.

What is a very simple method of demand forecasting? ›

Trend Projection: It is the simplest and most straightforward method to forecast demand that involves the use of previous sales data in order to predict future sales.

What is simple mean forecasting method? ›

A simple moving average (SMA) is the simplest type of technique of forecasting. A simple moving average is calculated by adding up the last 'n' period's values and then dividing that number by 'n'. So the moving average value is considered as the forecast for the next period.

How do you forecast sales growth? ›

The most widely used, traditional sales forecasting method is to take the sales figure from the previous year and multiply it by a growth rate gleaned by historical performance of the product or service.

Why is forecasting important in a business? ›

Forecasting is valuable to businesses so that they can make informed business decisions. Financial forecasts are fundamentally informed guesses, and there are risks involved in relying on past data and methods that cannot include certain variables.

What is the goal of forecasting? ›

Prediction is concerned with future certainty; forecasting looks at how hidden currents in the present signal possible changes in direction for companies, societies, or the world at large. Thus, the primary goal of forecasting is to identify the full range of possibilities, not a limited set of illusory certainties.

What are the five steps of forecasting? ›

  • Step 1: Problem definition.
  • Step 2: Gathering information.
  • Step 3: Preliminary exploratory analysis.
  • Step 4: Choosing and fitting models.
  • Step 5: Using and evaluating a forecasting model.

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