Sales Forecast

What are sales forecasts?

Sales forecasts are estimates of your sales for the forecast period.

The sales forecast establishes the level of activity used in all the other forecasts and budgets for the business. If your sales forecast varies wildly from your actual results, your cash flow and profitability forecasts will similarly be inaccurate. Regularly updating forecasts ensures current market intelligence, buying signals from clients and the efforts behind the marketing strategy can be taken into account for the next forecast.

To get started, ask yourself how much can you realistically sell next year, and how much will you charge for your goods or services?

If you are already in business, use sales data and internal accounting records from previous years in addition to external current market and economic indicators to develop a realistic forecast.

If you are starting a new business and don't have a trading history, base your sales estimates on market research, industry information, business strategies and objectives.

Download the Business Tool: sales forecast spreadsheet to complete your sales forecast.

Unit selling price method

Add up the individual sales forecasts for each product or service sold by the business to obtain an overall sales forecast.

  • List all the products or services you plan to sell.
  • Estimate the number of units to be sold for each type.
  • Determine the selling price for each unit.
  • Develop a sales forecast for each unit
    (Unit sales forecast = Number of units sold x Price per unit)
  • Total the sales forecasts for all units to obtain an overall sales forecast

Sales method

The unit method might not be practical for businesses with many items in inventory. If so, divide the business into departments or categories, then forecast the sales in each area to obtain the total sales forecast.

Margin method

A sales forecast estimate may be derived by adding a mark up percentage to the value of the inventory you purchase for resale.

Estimated sales forecast = (total cost of stock x mark up ÷100) +                                                         total cost of stock


For example, your forecast sales will be $150,000 if your:

  • stock = $100,000 and
  • mark up = 50%

$150,000 (Estimated sales) = ($100,000 x 50 ÷ 100) + $100,000

This method is only suitable for a straight forward business that uses the same mark up on all products sold and assumes all inventory will be sold in the period. Alternatively, divide products into groups with the same mark up, then forecast the sales for each group to obtain the total sales forecast.

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