A sales forecast is a prediction of future sales over a specified period of time. Sales operations teams use forecasts to estimate the revenue that can be expected based on historical performance, market conditions, and strategic initiatives.
Forecasting helps sales leaders align goals across the organization and make better decisions about how to allocate resources. It also informs planning around sales capacity, inventory, production, and logistics.
There are two main approaches to developing a sales forecast:
Top-down forecasting starts with projections from company leadership based on broader economic factors and strategic plans. The forecast is then broken down into segments and teams. This method relies heavily on experience and subjective estimates.
Bottom-up forecasting aggregates projections from individual sales reps about their accounts and territories. Leadership then reviews and adjusts the projections as needed. This approach leverages on-the-ground knowledge from the sales team.
Accurate forecasting is crucial but challenging. Many companies use forecasting software to aggregate data and apply predictive analytics. Sales ops teams regularly analyze performance against forecasts to spot trends and adjust activities to reach revenue goals. With an uncertain economy, flexibility around forecasting is key.
