Sales Data Analysis & Reporting

The 4 steps to building a sales forecast

Jonathan Hubbard
Jonathan Hubbard
March 1, 2024

Sales forecasts are critical for setting expectations, guiding team efforts and gauging performance against growth targets. While spreadsheets provide basic projections, solutions like Numerik introduce process enhancements that boost accuracy and convenience.

Let's explore fundamentals around building a sales forecast and how modern platforms streamline this essential activity.

What is a sales forecast?

A sales forecast estimates expected revenue or unit sales for a given period. It represents a data-driven prediction to inform operational decisions and provide performance visibility.

Main benefits of a sales forecast

Effective sales forecasting delivers several key advantages:

  • Sets clear direction – An accurate forecast directs rep activities toward the best opportunities to drive growth goals. It prevents wasted efforts chasing unlikely deals.
  • Signals shortfalls – Early warning signs of underperformance prompt course correction before it cripples quotas. This allows swift strategy pivots or reallocations.
  • Informs resourcing – Anticipated sales shape hiring plans, inventory management and wider investments to support sustainable scaling.
  • Enables scenario planning – Various projections empower contingency planning to mitigate risks or exploit unexpected upside potential.
  • Provides transparency – Shareable forecasts assure stakeholders and align wider organizational efforts to sales outcomes.

Accurate forecasts clearly pay dividends across revenue generation, opportunity progression and capability building processes. Now let's explore core techniques.

Make sales forecasting easy with the 4 step sales forecast

Step 1: Set your sales revenue target and map customers

Start by clearly defining the total sales revenue expected over your chosen timeline – whether tracking annual recurring revenue, total contract value or transactional volume. Document this formally as your official target.

Then make a list of existing customer accounts and contacts that will contribute toward achieving that revenue goal based on historical precedents or contracted commitments.

For example:

Target revenue for Jan-Mar 2023 = $30,000

Existing customers:

  • Customer 1
  • Customer 2
  • Customer 3
  • Customer 4
  • Customer 5
  • Customer 6
  • Customer 7

This consolidated first step establishes (1) the revenue target to guide activities and (2) the customer roster to strategically focus efforts for efficient progression.

Step 2: Map target revenue by customer

Now split up your total target revenue from Step 1 and allocate specific amounts to each customer. Assign values based on:

  • Historical sales patterns with that customer
  • Existing contracted commitments
  • Assumed growth rates

Make sure the sum of all customer revenue allocations equals your original total target.

For example, for a $30K Q1 target:

  • Customer 1 = $4,000
  • Customer 2 = $7,500
  • Customer 3 = $960
  • Customer 4 = $6,670
  • Customer 5 = $9,000
  • Customer 6 = $430
  • Customer 7 = $900

Total expected from mapped customers = $30,000

This breakdown indicates how much revenue you expect to source from each customer account. It allows concentration of effort toward the highest potential opportunities.

Step 3: Build a dated revenue timeline

Now construct a dated timeline for achieving your target revenue mapped to each customer (from Step 2). This schedule should align deal progression milestones to your average sales cycle length.

Plug in expected revenue amounts on dates when you foresee securing commitments from each customer based on historical closing rates. This highlights windows requiring pitch meetings, contract approvals, etc.

Additionally, the timeline presents opportunities to push for expanded revenue potential from strong fits by planning additional touchpoints.

For example, to hit a $30K March target:

  • You’ll need to start contacting all customers early that month.
  • You might need to schedule visits ahead of time to ensure you’ll be able to close deals before the period ends.
  • Customer 6 may have the potential to spend $700 - what will you need to do, and when, to secure that extra spend by 31 March? 

Here is what a dated revenue timeline might look like in this scenario:

  • Jan 15: Begin contacting all customers to scope needs
  • Feb 1: Meet with Customer 6 to assess expansion potential
  • Feb 15: Meet with Customer 2 to pitch upsell proposal
  • Mar 1: Send quotes and contracts to Customers 1, 3, 6
  • Mar 15: Follow up on final approvals and signatures
  • Mar 31: $32K target achieved

The timeline drives proactive planning to progress top opportunities through sales stages by key dates. Adjustments then redirect efforts to counter potential shortfalls.

Step 4: Continually adjust as needed

As the sales period progresses, variances between projected and actual revenue will emerge across customers. Continually revise initial forecasts up or down per the latest result signals.

For example:

  • Mar 31: $32K target achieved
  • Customer 5 may drop from a $9K expected spend while Customer 1 shows $2K upside potential.
  • Modify revenue timelines to reflect intensified efforts now required to capture expanded business from Customer 1 within typical sales cycles.

Updating initial projections preserves accuracy as market conditions shift - keeping teams focused on the best opportunities. Solution like Numerik automate this through direct data feeds that instantly reshape forecasts without manual manipulation.

Over time, fine tune processes to enhance predictive precision. But don’t permit forecasts to stagnate without regular adjustments - lack of updated visibility risks teams missing alerts that targets require urgent nudges until too late. Maintained accuracy provides clear direction even amid turbulence.

Interested in elevating your sales forecasting?

Purpose-built for sales teams, Numerik centralizes CRM data into an intuitive mobile interface. This allows effortless creation and adjustments of segmented forecasts tied directly to customer lifecycles and product categories.

Key features include:

  • Custom target setting – Configure revenue, volume or activity forecasts for any time period at organization, team or individual levels.
  • Real-time syncing – Continuous data feeds automatically update projections as deals progress to maintain accuracy.
  • Interactive analysis – Instantly adjust assumptions and gauge forecast variances through powerful segmentation capabilities.

Don’t rely on rigid spreadsheets. Elevate sales forecasts with Numerik for enhanced visibility, convenience and team alignment – driving growth targets with minimized risk.

Request a demo to discover how Numerik can transform your sales forecasting process. Or, for more sales tips, check out our blog on what to include in a top-tier sales deck.

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