How to Forecast Sales: The Best Sales Forecasting Methods and Tools

You can’t predict the future, but you can learn how to forecast sales—Especially when you have the best sales forecasting tools and methods at your disposal.

Sales forecasting is a tried and tested way for sales teams to get one up on the competition—even if the competition is their own performance last quarter.

Yet, according to a recent Gartner study, only 45% of sellers and sales leaders have high confidence in their company’s forecasting accuracy. Poor data quality is a major contributor to this distrust, and inaccurate forecasts make you an easy target for criticism when things go wrong.

Still, in the game of sales, it’s better to commit to informed goals based on data-backed analysis with the help of solid sales prediction processes and forecasting software tools than to create sales success out of thin air.

What’s important is figuring out how to forecast sales as accurately as possible, even with a growing portfolio of products and unpredictable market trends. In this blog we share a complete guide to sales forecasting methods.

Table of Contents

• What is sales forecasting?
• What is sales forecasting software?
• Why is sales forecasting important?
• What are the different types of sales forecasting?
• What are the core sales forecasting models?
• How to select the most effective sales froecast methods (step-by-step)
• How do I ensure the most accurate sales forecasting results?
• What is the best sales forecasting software?
• What features should I look for when evaluating sales forecasting software?
• Common challenges when forecasting sales
• Sales forecasting FAQs

What is sales forecasting?

Sales forecasting is the process of estimating and predicting the total revenue or number of deals you will close in the future based on past data.

Sales organizations combine private historical data, relevant public economic data, and past trends to create a sneak preview of short-term and long-term possibilities for a company’s success. Forecasts are used to establish monthly, quarterly, or yearly revenue benchmarks and can be a factor when calculating team commissions.

Forecasting is widely considered a foundational aspect of business analytics. That’s because sales forecasts often form the basis of strategies around everything from hiring new business associates to targeting specific accounts and predicting restocking needs for storefronts based on geographic location. That’s the power of sales forecasting!

Although forecasting in sales is based on factual information, uncertainty, and risk are important factors to consider in the overall equation. Because uncertainty is, well, uncertain, and the effects of risk-taking aren’t entirely predictable either, it’s good to keep in mind that a forecast isn’t guaranteed to come true.

Still, much like a weather forecast, having an umbrella with you and not having to use it is better than getting caught in an unexpected downpour without one!

What is sales forecasting software?

A sales forecasting software tool is the closest thing to a crystal ball that your company will ever get.

These sales forecasting tools evaluate your lead volume, pipeline value, and the likelihood of each lead closing to predict future sales performance as accurately as possible.

Sales forecasting tools aim to answer three distinct questions:

• How much revenue can we expect to generate in the future?
• How do our actual sales compare to revenue projections?
• Which lead types have the most significant impact on our forecasts?

Once you’ve answered these questions for your business, you’ll know which sales activities to focus on, which prospects are worth pursuing, whether to adjust your team’s quota and how to boost your sales and grow your company.

Why is sales forecasting important?

Sales forecasting helps businesses make data-driven decisions, plan for the future, and optimize their sales processes.

Sales forecasting provides benefits in various areas, including:

• Informing growth strategies: Sales forecasting offers data about what to expect in terms of sales and which strategies can help you get there. It enables you to plan for the future and informs strategies for sales, marketing, and your overall business performance.
• Budgeting and resource allocation: Forecasting helps you predict how much revenue to expect in the future and where you may need additional resources to meet demand. Sales forecasting data informs budgets, hiring, inventory management, and other activities supporting the sales pipeline.
• Evaluating performance: Sales forecasting also assists in selecting benchmarks to aim for to ensure you’re on target to hit your goals and adjust as needed.

To realize these benefits, you must select a quality sales forecasting tool and appropriate prediction methods that work for your business.

What are the different types of sales forecasting?

Sales managers can apply different techniques when forecasting sales based on the information they need and value most. While there are several sales forecasting methods one could employ, these can be categorized into these two primary forecasting types:

• Qualitative sales forecasting: Based on non-tangible characteristics, qualitative forecasting relies on expert opinion, judgment, and insight to predict potential future sales and revenue.
• Quantitative sales forecasting: This sales forecasting method focuses purely on the data, using historical revenue, sales figures, and trends to predict upcoming revenue outcomes.

What are the core sales forecasting models?

Just like there is more than one way to win a sale, there is more than one way to create a sales forecast. There are five primary sales forecasting models, each with its own definition, purpose, and process:

• Trend analysis
• Regression analysis
• Time series analysis
• Causal analysis
• Judgmental analysis

Trend analysis

Trend analysis is a type of sales prediction model that analyzes past sales data to find patterns. Patterns can exist in many different categories, including seasonality, geographic location, target audience, and more. The findings from a sales trend analysis are used to make revenue projections and track potential changes in performance. 

The trend analysis model is essential because it gives companies insight into short- and long-term performance. Companies can focus on different segments of their business to come up with an educated guess about what they need to continue or stop doing to alter future results. 

For example, a high-grossing candle and home fragrance company may use trend analysis to understand which popular scents have been in the most demand over winter holidays for the past five years. 

This information can then be used to more accurately plan for upcoming production needs, create marketing campaigns, and determine how they can either recreate or build on past revenue achievements.

Regression analysis

Regression analysis is the sales forecasting model that inspects how individual sales strategies (the independent variable) affect performance (the dependent variable) over time. 

The model uses past performance data to predict what could potentially happen if the strategy continued or if another was used in its place. This sales forecasting method is more heavily rooted in math than others.

Regression analysis is essential for companies that need to gain a deeper understanding of their sales performance and how they can change it on a detailed, granular level. 

To conduct this analysis, sales teams will need to have a clear understanding of what is affecting their sales both internally and externally. They’ll also need to have collected enough data regarding these variables over time to come up with an accurate forecast. 

That also means the variables they assess will have to be measurable, which is why this method typically examines sales strategies over time since companies have access to all the information needed.

Time series analysis

Time series analysis in sales forecasting uses data collected at various time intervals to track changes over time. This can be used to create new sales strategies, determine the likelihood of a particular outcome, or understand the underlying cause of a predicted outcome. 

One of the biggest benefits of using the time series analysis model over other sales forecasting methods is the ability to predict patterns over seasons, cycles, and trends. It’s also helpful in uncovering irregular past data points that don’t create patterns.

To properly use time series analysis to make predictions for the future, you’ll need to record your sales data consistently. Some real-world applications for this sales forecasting method include pricing out physical goods affected by supply chain shortages and revenue anomaly detection, which should be considered when planning next quarter’s sales strategy.

Causal analysis

‍Causal analysis is a type of sales forecasting technique that assesses and predicts how market fluctuations will affect a company’s profits. This type of forecasting makes it possible for sales teams to develop strategies and plans for the foreseeable future. It can also help them develop sales and advertising models that make goals as future-proof as humanly possible. 

A causal sales forecasting model starts with assessing the market’s current state and identifying the factors that will influence its direction over a certain period. These include the company’s current position, the independent variables, and the dependent factors.

For sales teams, causal analysis ensures your department is ready for anticipated demand. This means you can stay on top of potential slow periods, such as a recession or industry shakeup, as well as periods of high growth where a boom in the market is soon expected. 

As we mentioned earlier, this sales forecasting method isn’t guaranteed to be completely accurate. But it does help leaders avoid unexpectedly getting caught in the rain.

Judgmental analysis

Businesses typically employ the judgmental analysis sales forecasting model when they have little to no historical data to work with. But it’s also often used in situations where leaders are unsure about the market or feel it’s time for a more innovative sales and marketing approach.

There are a few advantages to choosing a judgmental analysis approach. One is the ability to include qualitative elements like experience and related insights in forecasting. Another is that it opens the door to new ideas, tactics, and strategies regardless of data gathered over the years.

Learning how to forecast sales in this way also makes it easy to pivot when faced with changes in the market or your business. It eliminates the need to wade through data reports for an adjusted approach, allowing companies and teams to adapt and recover quickly.

That said, a sales forecasting model that’s almost entirely reliant on cognitive input invites the potential for human error. There’s also the issue of diversity, as the judgmental analysis technique relies heavily on the individuals available to contribute to the forecast. Teams that lack diversity may not offer as much in terms of idea and input quality.

How to select the most effective sales forecasting method (step-by-step)

The point of sales forecasting is to find an answer to the question, “How can we expect our sales to perform over a certain period?” All the above types of sales prediction methods are designed to provide those answers.

Regardless of which forecasting model you choose, you’ll need to complete the following steps to use it effectively:

Step 1: Define your plan

Clarify the problem, outline how the forecast information will be used, identify who the findings are intended for, and determine how the forecasting project responsibilities will be divided.

Step 2: Gather materials

This includes relevant data, information from your CRM, and tools you may need to complete your sales forecasting model of choice.

Step 3: Conduct a preliminary analysis

What are your predicted outcomes for this forecast? Consider relevant factors such as seasonality. You’ll later compare your expectations versus the result. Also, consider the pros and cons of the particular sales forecast method you’ve chosen and how that may affect your view of its prediction.

Step 4: Use your sales forecasting model

Run your model and look for an outcome. The outcome should make sense with the question you asked. If it doesn’t, look for errors and then adjust before running it again. Make sure to record results from each run, just in case.

Step 5: Assess the results

Did the information you received from the sales forecast method align with your expectations? Why or why not? If the following output data were to come to fruition, how would it affect what your sales team does moving forward?

How do I ensure the most accurate sales forecasting results?

There are a few things to look out for when learning how to forecast sales to ensure you get as accurate a prediction as possible. Take heed of these factors to ensure your numbers give you a true reflection of what to expect over the coming term:

• Historical trends: Evaluate sales data from the year before, looking at different aspects such as sales per rep, the sales climate over that period, your product, and your pricing. Use this information to determine an average sales revenue amount per period and use it as a foundation for your forecast.
• Sales pipeline data: Consider your pipeline leads, including the number of leads, which stage they’re in, their conversion probability and rate, and the average expected revenue for each completed potential sale.
• Potential changes: Factor in any possible changes you plan to make over the next sales period and adjust your forecast accordingly. This could include changes in pricing, staff, promotions, territories, products, and more.
• Market trends: Consistently tracking macro activities and trends within your industry pays dividends when it comes time for sales forecasting. Use what you’ve learned over the past year or more to predict what might happen in the market over the coming period.
• Competitor behavior: Monitoring your competitors is essential, as it’s a key forecasting component. When making your predictions, consider competitor products, marketing campaigns, new companies, expansions, and more.
• Sales and marketing performance: Evaluate your sales and marketing team’s performance in terms of sales figures, training, qualifications, campaign efficacy, etc., to inform predictions for the coming period.
• Business strategy: Quantify how your business plans for the coming sales period might affect your revenue. Whether you plan to expand, enter new markets, or launch new campaigns, you must determine how these variables might influence your forecast and factor them in.

What is the best sales forecasting software?

When it comes to sales forecasting software, you have options. The key is finding the right one for your company, which will require some research. Lucky for you, we’ve already done the heavy lifting. Take a look at our seven picks for the best sales forecasting software:

1. Nutshell
2. InsightSquared
3. Anaplan
4. SPOTIO
5. Gong
6. HubSpot
7. Pipedrive

1. Nutshell

Nutshell is an all-in-one sales and marketing platform that helps B2B teams close more deals by taking time-wasting tasks off their plate and helping them capture their best opportunities. 

One of the top-rated CRMs on the market, Nutshell, is loaded with handy features such as pipeline management, sales automation, embeddable web forms, and customizable reporting tools that are all super simple to use. Nutshell also functions as sales engagement software, helping teams automate and track communication with prospects. But what we really want to talk about is Nutshell’s sales forecasting capabilities. 

Available in the Nutshell Pro package, Nutshell’s forecast report allows you to segment your forecasts by product, pipeline stage, and more, all within the specific date ranges that matter to you.

Users also appreciate Nutshell’s pricing transparency. Nutshell Pro costs $49/user/month when billed monthly and $42/user/month when billed annually. All Nutshell subscriptions include unlimited contact and data storage and access to their friendly, Michigan-based support team.

2. InsightSquared

According to InsightSquared, “Sales is complicated enough. Forecasting should not be.”

We couldn’t agree more, which is why InsightSquared leads our list of top sales forecasting software. If you invest in this tool, you’ll get access to advanced artificial intelligence that will help you streamline the forecasting process and achieve more accurate results.

InsightSquare lets you create forecasts for specific regions, products, and other segments. You can then analyze those forecasts by month or quarter. InsightSquared maintains all change records, too, which helps users understand why they’ve missed their sales goals.

Fortunately, all this sales functionality isn’t difficult to use. InsightSquared doesn’t require any coding and comes with 350+ out-of-the-box reports. This enables sales managers to get up and running with their sales forecasting tools in a flash.

Pricing isn’t listed on the InsightSquared website. To learn how much this forecasting solution will cost you, contact the InsightSquared sales team.

3. Anaplan

Anaplan is a flexible sales forecasting software that will help you make decisions faster and more confidently, thanks to its impressive feature set.

With Anaplan, sales managers can forecast sales by account, territory, or product line, which makes it a flexible sales forecasting tool that can support many different workflows. Anaplan also has a “Predictive Insights” feature that helps users identify their best opportunities so that they can allocate the appropriate amount of resources to each one and increase revenue.

Similar to InsightSquared, Anaplan does not post prices on its website. To learn about the cost of this sales forecasting software, you’ll need to contact Anaplan directly.

4. SPOTIO

SPOTIO is the sales engagement platform that was specifically made for field sellers.

With it, outside sales teams can generate leads, assign and manage territories, design efficient routes, stay in touch with prospects and customers, automate tasks, and run customized reports.

SPOTIO’s “My Reports” feature enables field sellers to build reports based on the most relevant data. You can easily track sales activities, pipeline metrics, and revenue data for specific reps and territories and then use this information to predict future sales.

SPOTIO offers four different plans, each with its own set of features and capabilities. However, the SPOTIO website doesn’t clarify what each plan costs.

5. Gong

With Gong, you can get “total visibility into your pipeline and use AI to forecast with superhuman accuracy.” It’s a bold claim—does it hold up?

We’re not sure how to quantify “superhuman accuracy.” What we do know is that Gong is a solid sales forecasting software that will definitely help you predict future sales performance. It does this via reliable AI features that help users get more done in less time.

Basically, Gong pulls data from your team’s calls and emails and then runs the details through its AI algorithms to pinpoint trends. Gong then uses the trends information to forecast sales and make recommendations for your team to generate more revenue.

So, how much does Gong cost? Well, that depends.

Gong creates custom pricing proposals for each of their customers. Your best bet is to sign up for a free product demo, tell the sales team about your needs, and let them give you a price.

6. HubSpot

HubSpot is a world-renowned marketing, sales, and customer service platform.

In terms of sales forecasting features, HubSpot has the tools sellers need to accurately predict future sales performance. For example, HubSpot includes a “Categories” feature that allows users to group sales together. 

According to HubSpot, this helps sales teams adjust their forecasts in real time, based on the knowledge available to them, without losing track of their current place in their pipelines.

HubSpot’s Sales Hub is available at four different price points. As you would expect, the more you spend, the more features you get access to. Unfortunately, HubSpot’s sales forecasting software is only available via the Professional and Enterprise plans, which cost $450 to $1,200 a month.

Related: Why is HubSpot so expensive?

7. Pipedrive

Pipedrive is a well-respected CRM tool that includes sales forecasting features.

One of the best things about Pipedrive is its highly visual nature, which helps sellers stay organized, effectively control their pipelines, and, most importantly, take action. 

Pipedrive is equipped with in-depth, easy-to-understand, and customizable performance reports.

You can use these sales reports to analyze past performance and the current state of your pipeline and identify both bottlenecks and winning patterns. This level of knowledge can then be used to predict future results with greater accuracy.

Another thing to note is that Pipedrive includes a “Subscription Revenue” report. This report allows sales teams to factor recurring payments into their sales forecasts.

Pipedrive offers five different plans, though only three of them include sales forecasting features. Expect to spend between $49 and $119 per user per month if you choose Pipedrive as your sales forecasting tool.

What features should I look for when evaluating sales forecasting software?

With so many sales forecasting software options, choosing the right one takes time and effort. It’s important to know the common sales forecasting software tool features that are available and essential to meet your sales forecasting goals. To help you narrow it down, here are seven vital features to evaluate.

1. Long-term strategic planning capabilities

Your sales forecasts should look at more than just the short term, so look for a sales forecasting tool that enables you to plan for your business’s long-term growth and sustainability.

Look for features that allow you to create forecasts for extended periods to align your strategies with your business goals, ensuring that your decisions today contribute to your success in the future.

2. Accurate sales projections

The accuracy of your sales projections is crucial for effective decision-making. A high-quality forecasting tool provides accurate predictions and continuously refines them as new data becomes available, helping you make informed decisions confidently.

3. Potential sales opportunities identification

The best sales forecasting tools don’t just project existing sales—they also help you identify potential sales opportunities. This could involve segmenting your audience, identifying untapped markets, and suggesting new products or services to expand into. By uncovering these opportunities, you can proactively grow your revenue and your business.

4. Analysis of specific products or services

Different sales trends and patterns may apply to different products or services. Your sales forecasting tool should allow you to forecast sales for specific products or services in addition to your overall business.

This feature enables you to create strategies tailored to individual products or services—whether you’re identifying seasonal spikes, understanding the impact of marketing campaigns, or spotting shifts in customer preferences.

5. Integration with data sources

Your forecasts are only as accurate as the data they’re based on, so your sales forecasting tool needs to integrate with various data sources such as your CRM, sales platform, and inventory management system. Connecting with these other tools enables your sales forecasting software to access real-time data, improving the accuracy of your predictions.

6. User-friendliness

While advanced capabilities are necessary, ease of use is just as essential. A user-friendly interface simplifies the process of creating and interpreting forecasts, making the tool accessible to your whole team. Look for intuitive dashboards, customizable reporting options, and clear visualizations that make understanding your forecasts a breeze.

7. Scalability and customization

As your business evolves, your sales forecasting needs may change, and your sales forecasting software should be able to adjust to these changes. Look for a tool that allows you to customize forecasting models, adjust parameters, and add new data sources.

Common challenges when forecasting sales

Several essential components come into play when seeking to generate an accurate sales forecast. If one component is out of place, you could face a few forecasting challenges, even if you have the best sales forecasting software on the market.

These are some of the most common challenges faced by teams when trying to produce an accurate forecast:

• Disorganized pipeline: Working with a misaligned sales pipeline that includes outdated deal values, deals at the wrong stage, and the like is a one-way street to forecasting disaster.
• No historical sales data: Past sales and performance data are essential forecasting components. Without them, creating an accurate sales forecasting report would be tough.
• Inaccurate data: One of the most common forecasting challenges is incorrect data, which inevitably leads to an inaccurate forecast.
• Poor collaboration: If your sales, marketing, finance, and other key departments aren’t communicating effectively and sharing critical data with each other, you could find yourself without all the information you need to generate an inaccurate sales projection.
• Seller biases: Gauging future sales revenue based on how your sales reps feel about their prospects rather than leaning into the hard data can quickly steer your forecasting efforts toward failure.
• Tech constraints: Consolidating all the data you need to execute a successful sales forecast is paramount, and without efficient app integration and a centralized hub to organize your information, you may find it difficult to project future sales accurately.

Sales forecasting FAQs

Still have questions about sales forecasting methods? Check out the frequently asked questions below to get answers!

What are the benefits of sales forecasting?

The benefits of sales forecasting include:

• Coming up with a baseline for realistic goal setting at every level
• Making informed decisions
• Resolving conflicting priorities
• Properly distributing resources
• Preventing or mitigating potential roadblocks
• Collaborating with other departments on shared projects
• Providing a sense of security for investors and other key stakeholders

What is the best way to forecast sales growth?

The best way to forecast your sales is to use whichever sales forecasting model is based on your historical sales results. When your sales projections are very close to your actual sales numbers, within a reasonable margin, you know you’re using the right sales forecasting methods.

What is the number one rule of sales forecasting?

The number one rule of sales forecasting is to use data that’s as accurate as possible. Your forecast will only be as precise as the data it’s based on. It’s also critical that your forecast is conservative and consistent with your historical sales data.

Why Nutshell is the best sales forecasting software

Sales forecasting methods and tools help teams identify potential opportunities and develop strategies to achieve their sales quotas. 

Most forecasting models use historical data to predict the future, and they all serve several useful functions for any sales team. There are many different techniques for creating a sales forecast, but the right one for you depends on what you’re trying to achieve and why. 

Data-powered tools, such as Nutshell Pro’s powerful sales forecast reporting features, make it easier to view and compare the data needed to make informed predictions.

When you choose Nutshell as your sales forecasting software, you’ll benefit from robust, customizable sales forecasting reports that improve sales progress analysis activities and more.

With Nutshell’s reporting and analytics capabilities, you can:

• Modify your forecasts according to lead confidence for improved accuracy
• Pinpoint the reasons behind lost sales so you can optimize your sales cycle
• Sort and group customer data by behaviors, channels, demographics, and more to forecast for specific audience segment
• Use historical sales data and trends along with existing pipeline deals to forecast future sales
• Run MoM, QoQ, and YoY comparisons between your sales metrics and your performance data
• And more

Try our simple, affordable CRM free for 14 days and discover how Nutshell can help your sales team dive deep into closed deals to date, pipeline size, projected sales, and whether or not your team is on track to hit your targets.

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