{"id":12150,"date":"2021-04-15T11:01:47","date_gmt":"2021-04-15T10:01:47","guid":{"rendered":"https:\/\/woodpecker.co\/blog\/?p=12150"},"modified":"2025-12-19T08:45:32","modified_gmt":"2025-12-19T07:45:32","slug":"sales-forecasting-methods","status":"publish","type":"post","link":"https:\/\/woodpecker.co\/blog\/sales-forecasting-methods\/","title":{"rendered":"What Sales Forecasting Method Is the Best for Your Team?"},"content":{"rendered":"

Sales forecasting offers you a glimpse into the future of your sales revenue. And what company wouldn’t want to get a sneak peek at that? Without accurate sales forecasts, your marketing efforts will find it more difficult to align with customer demand and your future revenue will always be something of a recurring monthly surprise.<\/span><\/p>\n

This means the ability to predict future sales performance has a great influence on your marketing strategies.<\/span><\/p>\n

But there isn’t one bulletproof method of predicting sales that will work for all companies. Instead, there are several that can work for coming up with good sales forecast estimates and help your marketing team create strategies based on those sales outcomes.<\/span><\/p>\n

This post will focus on some of the most popular methods of creating a sales forecast based on historical sales data, various data points and more.<\/span><\/p>\n

So let’s dive into this brief guide to sales forecasting!<\/span><\/p>\n

What is sales forecasting?<\/b><\/h2>\n

Sales forecasting is an estimation of your future sales for a given period of time. Most sales forecasts are done on a monthly, quarterly or yearly basis.<\/span><\/p>\n

It goes without saying that sales forecasts should be as accurate as possible. But the standard for accurate sales forecasts is flexible by necessity since it’s impossible to make a 100% correct prediction.<\/span><\/p>\n

There are several approaches you can take to try to estimate your future sales revenue. The forecasting process doesn’t always have to follow the same path. Some methods are backed with past sales data, some focus on current sales figures, others rely more on market research and still others use sales forecasting software.<\/span><\/p>\n

On the other hand, plenty of organizations take the old school route of looking at their current sales pipeline and using the input of their sales team.<\/span><\/p>\n

There simply is no single “correct” way to estimate future sales.<\/span><\/p>\n

We’ll get into more detail about sales forecasting methods below. But first, see why sales forecasting is a must.<\/span><\/p>\n

The importance of sales forecasting<\/b><\/h3>\n

With sales predictions and reasonably accurate forecasting, you can get a better idea of how to plan ahead for hiring new team members, budgeting and managing resources<\/span><\/p>\n

Should you <\/span>hire another sales rep<\/span><\/a>? What should the budget for marketing be right now? Will you meet important sales targets? Are you setting realistic sales quotas for your team?<\/span><\/p>\n

A sales forecast will help you and other stakeholders<\/a> at your company to make better, informed decisions about these and other issues.<\/span><\/p>\n

With accurate sales forecasts, you can identify issues with your sales strategy or overall performance before they become bigger problems.<\/span><\/p>\n

Sales managers and other stakeholders can be aware of what they can expect in terms of revenue and plan in advance. Investors also benefit from being able to make better, more timely decisions as well.<\/span><\/p>\n

So how can you predict sales in a way that is reliable and create an accurate sales forecast that can be used?<\/span><\/p>\n

Sales forecasting methods<\/b><\/h2>\n

Here are some of the most often-used sales forecasting methods:<\/span><\/p>\n

Deal stages<\/b><\/h3>\n

What’s it about?<\/b> In this method, you assess how likely deals are to close, based on at what stage of the pipeline they are currently in. That’s why we sometimes call it ‘pipeline forecasting’.<\/span><\/p>\n

How does it work?<\/b> Once you choose the reporting period and determine the potential value of each deal and how likely it is to close, you multiply the probability by the size of an opportunity.<\/span><\/p>\n

You back this method with <\/span>data<\/span><\/a> \u2013 you use your conversion rates in between deal stages to identify the probability of closing, so this metric has to be reliable. Otherwise, the results will be inaccurate. Every forecasting method relies on accurate inputs to get accurate outputs.<\/span><\/p>\n

See how to <\/span>identify your sales process stages and conversion rates>><\/span><\/a><\/p>\n

What this approach doesn’t take into account, though, is the age of a given opportunity. This means two opportunities could be assigned the same potential value, even though one’s been sitting in the pipeline for 4 months, and the other for 4 days.<\/span><\/p>\n

Every kind of sales forecast has some kind of blind spot.<\/span><\/p>\n

Past data forecasting<\/b><\/h3>\n

What’s it about?<\/b> You use historical data to create a prediction for future sales.<\/span><\/p>\n

How does it work?<\/b> You take a look at the past sales data for a given time period, e.g. a month or a quarter, and make an estimate. You can add your average growth rate into the equation.<\/span><\/p>\n

This is a traditional forecasting method that has served businesses well. After all, what better way to get an idea of how much you will sell, for example, this December than by looking at how much you sold last December?<\/span><\/p>\n

Sales forecasting doesn’t always have to be high-tech and complex. Basic sales metrics like how much you sold in the same period in the past can also be a valuable guide.<\/span><\/p>\n

Make sure you’re using comparable time periods. For example, if December always brings you much more sales than other months, don’t make a prediction for July based on it.<\/span><\/p>\n

Take seasonality and the demand into account. This historical forecasting method has to accommodate the same rises and falls that always influence sales.<\/span><\/p>\n

Think also about any internal factors that might affect the results, e.g. has your team grown recently? Is your biggest competitor running an effective <\/span>marketing campaign<\/span><\/a>? Are industry trends creating a difficult sales environment? Are there other factors in play that can affect sales?<\/span><\/p>\n

Some of those factors might be hard to show in specific numbers, which is a downside of this approach. Accurate forecasts depend on accurate inputs into the model, which is not always possible.<\/span><\/p>\n

You also won’t be able to use it in new businesses, since there’s no past data to use yet.<\/span><\/p>\n

The \u201cask a sales rep\u201d method<\/b><\/h3>\n

What’s it about?<\/b> The name already gives it away. Here you rely on your sales reps’ prediction of closing their deals.<\/span><\/p>\n

How does it work?<\/b> This is as simple as it gets \u2013 you ask your sales reps two questions:<\/span><\/p>\n