Sales Forecasting: How to Do it Quickly & Accurately [+ Template]

With the right method, template and tool

If you’re looking to improve your sales forecasting skills and know what future sales you can expect for your business, we’ll get you started in no time - that’s a promise.

After all, a good sales forecast is essential if you want to know whether you’ll reach your targets to get your commission or bonus (as a salesperson) or to cover your expenses (as a business owner).

We will quickly cover what sales forecasting is about, how you can best do it, and what Excel template or specialized software you can use (we have both of those ready for you! 😘).

Here’s what we’ll cover:

• What is sales forecasting?
• What are the available methods and formulas, incl. examples?
• How can I do it with the downloadable Excel & Google Sheets templates?
• How can I do it with a tool like Salesflare?

Let’s break it down. 👇

A definition: What is sales forecasting?

Before we get started, let’s get on the same page about what we mean when we say “sales forecasting”.

Here’s a possible definition of what sales forecasting is:

Sales forecasting is the process of estimating a company’s sales revenue for a specific future time period, most commonly a month, quarter or year. It’s a prediction of how much a company will sell in the future. Accurate sales forecasting enables companies to make informed business decisions about resource allocation and budgeting.

If you don’t have an accurate sales forecast for your business, you’re essentially flying blind. You don’t know whether you’re going to hit your targets, or whether you need to cut costs and/or go attract some extra cash.

And if you’re an individual salesperson, it’s obviously a great idea to track your progress towards achieving your sales targets. 📊

How to do it: Sales forecasting methods & formulas, incl. examples

There are many methods out there and we don’t want to confuse you with all of those. Instead, we’ll present you with one recommended method and then explain some alternative methods.

We’ll also present you with concrete examples and/or formulas so you don’t need to do any further Googling to understand how it all works. 🧐

Pipeline Forecasting Method (Recommended)

If you’re getting started with sales forecasting and looking to calculate a forecast both quickly and accurately, then you probably best use the “Pipeline Forecasting Method”.

This sales forecasting method uses what you know about the opportunities in your current sales pipeline to estimate what the amount of sales is that you’ll probably close within a specific time period. 📈

It uses the following forecasting formula:

Forecasted Sales = Sum of ((Probability of Winning an Opportunity) x (Value of an Opportunity)) for all opportunities with an expected close date in the relevant period

For example, if you have the following sales opportunities in the pipeline:

• $40,000 opportunity with a 50% probability of closing it around 31st of January
• $100,000 opportunity with a 20% probability of closing it around 10th of February
• $200,000 opportunity with a 10% probability of closing it around 15th of March
• $100,000 opportunity with a 20% probability of closing it around 30th of April

Then your your sales forecast for the first quarter of the year will be:

$40,000 * 50% + $100,000 * 20% + $200,000 * 10% = $60,000

This is of course a much simplified calculation example to allow an easy verification of how the formula works.

If you want to calculate this kind of sales forecast live and on an ongoing basis, this Pipeline Forecasting Method is entirely automated in a sales CRM solution like Salesflare. ✨

The “Expected revenue vs. revenue goal” report in the “Revenue” dashboard will not only forecast your revenue for the selected period, but also compare it to your revenue goal. That way you know whether you’re on track to reach your target. 🎯

To get an accurate sales forecast, the following things are important:

1. Have at least 10-20 non-closed / open opportunities in the pipeline with an expected close date in the relevant period.
2. Estimate the close date as accurately as possible. One way to do this is to explicitly ask your prospect or customer about their estimated timelines. Then correct this estimate based on your experience.
3. Estimate the value of the opportunities as accurately as possible. This usually becomes easier as the opportunity progresses through the sales pipeline, as along the way the scope of the opportunity becomes clearer and quotes are made. Luckily, opportunities that are earlier in the sales pipeline get multiplied by a lower probability percentage, so a single opportunity in an early stage will have less effect on the outcome.
4. Estimate the win probability of each opportunity as accurately as possible. The easiest and most accurate way is to use a win probability per stage. This “stage probability” can be adapted based on your historical performance. (Note that, as an exception, for pipelines with less opportunities of higher value, setting a probability per opportunity can yield more accurate results.)

To accurately calculate this win probability per stage, a sales CRM solution like Salesflare can crunch the historical data about your opportunities. You can find the result of this data crunching in the built-in “Funnel analysis” report on the “Revenue” dashboard. 😁

This report additionally also gives you an idea of the conversion rates from stage to stage, as well as how long each won opportunity stayed on average in each stage of the sales pipeline.

Other sales forecasting methods

There are several other possible sales forecasting methods, but most of those are either overcomplicated or require an overly large dataset to work. They are in most cases also unlikely to yield a more accurate result than the Pipeline Forecasting Method.

For the sake of completeness and in case you’re interested, or if you just want to have a simple sanity check for the results of your Pipeline Forecasting Method, here is a quick overview of some of these other methods including a concrete example or formula for each:

Time series analysis

This method involves analyzing historical sales data to identify patterns and trends. It assumes that past patterns in sales will continue into the future.

There are several time series based formulas you can use for this such as the “naive method”, the simple moving average, the weighted moving average, and exponential smoothing:

• Naive method: Just assume that sales will be the same next month as this or last month.
• Simple moving average: For example, to calculate the sales forecast for the next month, take the average of the sales results in the x preceding months.
• Weighted moving average: For example, to calculate the sales forecast for the next month, take the sum of (sales results in month * weighting factor) for the x preceding months. Usually this weighting factor is higher for recent months and gets progressively lower for less recent months.
• Exponential smoothing: This is usually like a weighted moving average with a weighting factor that gets exponentially smaller. There are however more complicated versions that can also support trends or seasonality (just Google “double exponential smoothing” and “triple exponential smoothing” - it can get a little more complex).

In short: this method of sales forecasting uses an extrapolation based on historical results that sounds or looks fancier than it really is. 😏

Regression analysis

This sales forecasting method does not purely use a time extrapolation.

It uses a mathematical equation to model the relationship between a dependent variable (sales) and one or more independent variables (such as advertising spend or economic indicators). The basic formula for a linear regression is:

y = a + bx

where y is the dependent variable (sales), a is the y-intercept, x is the independent variable (advertising spend), and b is the coefficient representing the change in y for a one-unit change in x.

This kind of forecasting method is useful if you have identified factors that accurately predict your sales results and that you can themselves accurately forecast in the future. Plus you need someone who is versed in statistics to build the forecasting model. Otherwise, it’s unlikely that you’ll get dependable results. Or with one emoji: 🚮

Sales forecasting in Excel or Google Sheets with our free template

If you want to get started quickly with forecasting your sales using the Pipeline Forecasting Method, we have built a free template for Excel and Google Sheets to do just that.

You can download the free template here. No email address asked. 🆓

Some of its main functionalities:

• It presents a graph of your sales forecast for the year + per quarter.
• You can adapt the stage and its probabilities to dynamically adjust your forecast.
• You can even track your sales pipeline in the template, tracking company names, contact details, last interactions, next steps, etc.

Here is a video tutorial on what it does and how you can use it:

Of course, while this spreadsheet template can provide an overview of your sales pipeline and calculate a live sales forecast based on it, it won’t really help your sales team in their sales follow up, which makes it less likely that it stays neatly up to date.

Plus, it doesn’t integrate with your email inbox or LinkedIn, doesn’t send email sequences, track emails, send live notifications and reminders, keep historical updates, track activity metrics, …

That’s why specialized sales CRM software tools like Salesflare exist. 👇

Sales forecasting in a CRM software tool like Salesflare

While there is a lot of sales forecasting software around, the main bottleneck to make sales forecasting work is getting the necessary data from the sales team. 😅

If your salespeople don’t update the CRM diligently, your sales forecasts are based on outdated or partial data and likely to be very inaccurate.

That’s why you need a system in which they’ll actually track their sales, plus that has built-in live and automated sales forecasting abilities, like Salesflare. ✨

We showed earlier in the section about the “Pipeline Forecasting Method” what such a sales forecasting report looks like in Salesflare:

The sales dashboarding and reporting capabilities of Salesflare are of course way more extensive than this one report.

Here is a screenshot of one of the built-in dashboards (the one that includes the above report):

If you want to find out how this built-in reporting works, you can check out this tutorial video. If you’re thinking about building your own custom reports, read this overview of dashboard examples and watch this tutorial video on Salesflare’s custom reporting.

If you’re wondering why your sales team will actually use Salesflare, here are some of the top ways in which it will help them be more successful: 💪

• Instead of relying on manual data input from your sales team like other CRMs do, such as Salesforce or Hubspot, Salesflare automatically creates contacts for everyone they email or have meetings with. It finds names, email addresses, phone numbers, roles, addresses, social profiles, … by extracting information from your email inbox as well as from the internet.
• Salesflare keeps track of all emails, meetings, calls, email opens, clicks, website visits, … automatically and uses this information to give an overview of all interactions and trigger reminders to follow up with your leads, so none slip through the cracks.
• You can track emails, insert email templates, send email sequences, … so you essentially don’t spend your whole day emailing. Especially if you’re trying to generate leads.
• The mobile app is the only one you’ll find out there with 100% of the functionality of the desktop CRM app.
• Salesflare also provides a handy sidebar in LinkedIn and your email inbox (Gmail in Chrome & Outlook on Windows) so you don’t need to keep switching tabs. Plus the extension can find business emails for LinkedIn profiles.

And there’s much more! 😁

Salesflare is built for small and medium-sized businesses who sell B2B, so if that’s you, check it out. If that’s not you, check out this overview of example CRMs per use case.

If you want to explore Salesflare in detail, you can easily try the software for free or book a demo with us so we can personally show you around.

Ready to forecast your sales? We’re here to help if you have more questions. Just ask our team using the chat widget on salesflare.com. 👈

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