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What Is Sales Forecasting?
If you can’t predict or guesstimate how much of your product or service you plan on selling, you’ll never be able to figure out overhead expenses for your business. Sales forecasting is simply determining how much you think you’ll sell in a certain period, usually annually.
Sure you can buy fancy software that promises to do all the work for you, but in reality, the sales numbers have to come from your research and that means using a sample sales forecast template to guide you.
Realistic sales forecasts are most favored by investors and lenders as they are trained to determine unrealistic sales data and may question you if sales are over-predicted. It’s also important to learn how to predict sales on your own because only then can you really develop a cash flow forecast and since cash is king, you need to know how much revenue you expect to come in each month.
Most business experts will tell you once you’ve set that sales forecast, it is set in stone and you better meet those goals. I disagree with those experts; actually, you can modify sales forecasts, especially if you are a new business owner and are developing an initial sales forecast.
The trick behind sales forecasting is knowing your product or service and understanding your customers.
Image Credit: (Itanium Sales Forecasts) http://commons.wikimedia.org/wiki/File:Itanium_Sales_Forecasts_edit.png
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Using a Sales Forecast Template
Some business templates such as a cash flow forecast have areas where you can predict sales, include all your other revenues, and list expenses to determine net cash each month. While these types of templates are great tools, using a sample sales forecast template can help you better understand what predicting sales truly means before you move on to the next step of business expenses. After all, you need to know how much revenue to expect before you can plan for or adjust business expenses.
First, download the MS Excel Sales Forecast Template found in our Media Gallery. This particular template is for an entire year from January through December—the most common type of sales forecasting.
This example of a sales forecast is probably the easiest to start with as it offers the following sections:
- Sales Category – What you are selling or what service you are offering.
- Number of Units – The number of units you expect to sell.
- Unit Price – The price for each item or service you sell.
- Total Sales – An automatic totaling of sales revenues for the month.
- Monthly & Annual Totals – It shows annual as well as monthly sales totals.
To learn how to forecast sales, read my article Tips for Forecasting Initial Sales for New Businesses, or if you are an existing business, read Explaining Commons Sales Forecast Formulas. Both of these articles right here on Bright Hub will offer you the best information on how to forecast sales.
Next play around with the sample sales forecast template from our Media Gallery or learn how to create your own sales forecast in Excel.
Once you feel you have a solid sales forecast that is realistic for your market area, you can then utilize other helpful tools for businesses such as cash-flow forecasting and expense budgeting.