A good sales projection allows companies to estimate the volume of revenue to be acquired by the business within a predetermined period. In this way, it is possible to organize financial strategies and make investments much more securely.
But, after all, how to make an assertive sales projection? Read on and discover this and other answers on the topic:
- What is a sales projection?
- What is sales forecasting for?
- How to project a company’s sales?
- How to calculate the sales projection?
- What are sales forecasting methods?
- What tools are used to project sales?
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1. What is a sales projection?
Sales forecasting is the act of planning or projecting the amount received as revenue by the company from its sales. In general, the period analyzed in the sales projection is one year, and may present monthly, quarterly and semiannual breaks to facilitate the analysis of results and, based on them, the business decisions.
The sales projection is also known, in some companies, as:
- sales planning;
- revenue forecast;
- sales budget;
- budget projection;
- Sales forecast.
2. What is sales forecasting for?
The sales forecast serves to guide decision-making in the company.
We even say that sales forecasting is the root of good business planning. This is because, based on the estimated revenue obtained in the business, it is possible to calculate the feasibility of investments or the need for cuts.
As a global tool, sales forecasting serves as a guide for various sectors, from finance to HR.
Citing just a few examples, the sales forecast helps to define:
- How many employees can be hired or need to be fired
- Whether it is feasible to invest in the expansion (development of new products, moving to a larger office, opening branches, etc.)
- How much will be paid in commissions, bonuses, profit sharing programs, dividends, among others
- Whether it will be feasible to invest in new technologies or, conversely, whether it will be necessary to make cuts
- And pretty much any other business decision!
3. How to project a company’s sales?
The step-by-step procedure for projecting a company’s sales should follow these steps:
- Track the business history, including cash flow. In this way, it will be possible to understand the company’s trends and work on the projection realistically;
- Consider a context analysis. The market situation and the economy of the country in which the company is located can significantly interfere with the expected sales volume;
- Analyze competitor behavior to absorb trends and avoid errors;
- List the events that generate the highest sales volume in the year, such as commemorative dates and launches;
- Create an average from all aspects analyzed above;
- Track results in month by month and makes adjustments as needed.
4. How to calculate the sales projection?
There are different ways to calculate a company’s sales projection:
- Market: Bases the forecast on a behavioral analysis of the market;
- Resources: determines the sales volume according to the production and sales capacity of the brand.
- Historical series: in this case, future sales are based on past sales;
- Seasonality: considers dates of highest and lowest sales volume (commemorative dates, launches, etc.).
After choosing the base criteria for the projections, you need to:
- establish a sales target (which can be numeric or percentage);
- dilute the objective realistically over the period analyzed (considering market variations and seasonality);
- Track the business’s sales progression based on forecasts.
5. What are sales forecasting methods?
The 3 main methods of sales forecasting are:
Origin of business
In this method, suitable for companies that use multiple business prospecting channels, the sales forecast is calculated from the analysis of the performance of each channel separately.
This sales forecasting method takes into account:
- Total number of leads by source;
- The total value of trades by origin;
- Registration of trades won by origin.
From there, the sales forecast is obtained from the equation:
Average sales value per lead x number of active trades in the period considered.
In this method, the characteristics of the business that increase or reduce its chances of closing sales are considered. The analysis under this perspective is indicated for mature companies, who know their strengths and weaknesses and that already have a determined PCI (Ideal Customer Profile).
For the application of this method, the following data are considered:
- Number of leads by evaluated characteristics;
- Value of trades by characteristic;
- A number of trades won by characteristics.
The calculation of the sales forecast, in this case, is made based on the performance analysis of each of the considered groups.
The third method of sales forecasting is sales funnel stage analysis. Here, the total number of deals at each stage of the sales funnel and the total value of deals at each stage are considered to define the company’s sales forecast.
In order to calculate the sales projection, it is necessary to understand how many deals in each stage of the sales funnel were considered earned in the analyzed time period.
The calculation for this step is simple:
Conversion rate = Number of trades won x 100 / Number of trades at a certain stage of the funnel
Next, you need to add up the value of the active deals at each stage of your sales funnel, applying the conversion rate for the stage. Again, just apply a simple rule of three:
Expected value = conversion rate x business value at a certain stage of the funnel / 100
Understand more about each of the sales forecasting methods in this full article on the topic!
6. What tools are used to project sales?
Currently, thanks to technological evolution, there are tools that store data and help to make the estimate more assertively. This is the case of CRM (Customer Relationship Management, or Customer Relationship Management) software. With the help of the tool, it is possible to consult the history of past sales and provision revenue based on medium and long term contracts.
See how the Scheduler can help you make your sales projection:
Your sales management needs to be data-driven!
In this article, you learned the meaning of sales projection, how to calculate this data and its impact on the entire business management. After reading it, I believe it is still clear how important it is to have a business leadership that is based on data and evidence.
The more you work with numbers and a good CRM tool to gather them, the greater will be your assertiveness in this forecast to enable the company to make the best decisions!