by A.W. Berry

Created on: September 28, 2009   Last Updated: October 15, 2009

There are many ways to create a sales forecast, and how a sales forecast is made is not the same as what a sales forecast is. Some sales forecasts are more accurate than others, but the information used in making the sales forecast also contributes to its validity. Sales forecasts can be made by hand on paper with a calculator, using Microsoft Excel, or with a specialized sales forecast software. Essentially one or more of the following are needed to make a sales forecast:

1) Past sales numbers
2) Sales and marketing budget numbers
3) Intervals at which the numbers are attributable to
4) Other dependent variables ex. Changes in sales force
5) Calculator, or Forecasting software

Determining which sales forecast to use for your business depends on 1) market consistency, 2) historical sales, 3) changes to marketing, project management or product and service line, 4) economic conditions and 5) forecast objective. This article will illustrate how to make different sales forecasts with different tools and methods, and then discuss the importance, relevance, pros and cons of sales forecasts.

I: Simple sales forecast using moving average

The moving average is a trend line that calculates an average number based on historical data. For example, if sales for the last two years averaged $120K per month and rose an average of 3% per month, a sales forecast that uses both moving average and the percentage rise in the moving average will give a sales prediction based on past sales patterns.

1) List historical sales on a piece of paper or spread sheet
2) Calculate moving average
3) Determine periodic percentage increase in sales
4) Create trend line by applying percentage increase to moving average

II: Sales Forecasts Using Microsoft Excel:

A few types of sales forecasts can be made using Microsoft Excel. These different forecasts use data differently or adjust data to arrive at more accurate predictions. All forecasts are predictions unless the variables are 100% constant into the future. The sales forecasts below use moving average, dependent variable i.e. causal relationships, and independent variables i.e. sales values. (Microsoft.com)

1) Create three or more columns in a Microsoft Excel Spreadsheet
2) One column for sales and another for time period
3) Click on the chart wizard
4) Highlight data box, proceed through wizard steps
5) Click on Chart tab and add trend line

For more detailed analysis of the above sales forecasting method using Microsoft Excel, regression analysis can be used

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