How to do sales projection

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How to do sales projection
Excel Spreadsheets

Whatever the size of a company, it is known that its existence is impossible without sufficient sales and billing to pay the bills and generate an adequate profit. So regardless of whether you are starting your business, managing an area that generates revenue or even financial planning, it is essential to make a sales projection.

customer prospecting worksheet

What is Sales Projection?

Sales forecasting or sales forecasting is basically an estimate of the amount of sales (and hence billing) that you can get in the future. It can be done by analyzing previous sales figures of the company and can certainly help a short, medium and long term planning. Here's an example of a projected revenue chart:

Excel Spreadsheets

Financial Projection - designed x carried out

Why make a sales forecast

One of the main objectives of making a sales projection is to identify the business viability over a stipulated period. In addition, sales forecasting is also recommended for the following cases:

  • Submit a concrete proposal to a bank or investor;
  • Provide for the possibility of amortizing investments to expand the business;
  • Know the periods of low and high sales during the year;
  • among other factors.

Economic Feasibility Study Sheet

Different methods of sales projection

Now that you already know the concept of sales projection as well as its importance within business planning, the time comes to know how to make this forecast. We separate four methods that can be chosen according to the reality of the company. Look:

1 Method: Projection with result analysis performed

Much more than inventing numbers or trying to deduce what may happen in the future, the first method (and one of the most important) is that of the outcome analysis that has already happened. It's pretty simple, you just have to analyze your past sales figures and sales figures. In our example, I use the Economic Feasibility Study Sheet to project to write down the revenues that actually occurred until August:

Sales forecasting - past result analysis

It's quite easy to see that we have a variation of R $ 5.000 of growth from month to month. So in a simplified way, if we kept the same investments, structure and conditions, we would probably grow R $ 5.000 for the other months of the year, generating this sales projection:

Sales projection - projection based on past result analysis

Obviously you can not always count on linear growth and everything will remain exactly the same, as new competitors can enter, your business may be affected by some seasonality or even external changes that you have no control over.

Anyway, this method is very important and the cool thing is that it is totally based on things that actually happened.

2 Method: Stock-Based Projection

Our second method is that of the stock-based sales projection that your company can perform to leverage sales. Let's see an example of a projected sales scenario (and revenue) for the next 3 years:

Sales Projection - Current Projected Scenario

Whenever you have a sales expectation, this can be modified if you change anything that relates to this projection. For example, we could plan to create a projected marketing action to increase our revenue by 20%. In the image below, this action-based change shows a more optimistic scenario:

Sales projection - optimistic scenario

When working with this method it is important to base your projections. In the case of a marketing action, it is necessary to understand why of choosing 20% increase revenue. A justification could be a smaller action that had been made, with a budget of $ 10.000 and that generated increase of 10% in the revenue. If at that time the planned action has twice the budget, you can expect double the result as well. Some important justifications and answers are:

  • Method chosen to promote your products and services
  • Number of clients to be reached with the chosen strategy
  • New products or services
  • Replication of strategies that have already worked
  • Among others

If you have enjoyed this method, I recommend that you see our Economic Feasibility Study Sheet, which is ready and ready to make all these projections.

customer prospecting worksheet

3 Method: Market-Based Projection

At times you may be a little lost and have no idea what kind of projection will work for your business. This scenario is very common when you are business plan or undertaking in a branch that has never acted.

In this case, an analysis of the market or even of potential competitors can give you a good help on which way to go. For this you can follow two paths:

  • Analyze a business similar to yours

Let's see an example of a restaurant that you believe to have a size and features similar to what you want to open. In that case, you could go to the restaurant to get the information you want. If you have the opening, it can be simple to get the numbers, if not, you can spend some time analyzing the amount of sales and types of dishes ordered. The idea is to get a daily estimate of product sales:

Sales forecast - number of products sold

If you can map an average number of sales of the main product types of the establishment and you know the average ticket (average value) charged by it, you can reach a sales projection per day and, consequently, the total.

Sales Projection - Operating Revenues

Now that you have an estimate, go back to the 1 and 2 method to complete your sales projection, analyze that with the costs and see if it's worth opening the deal.

  • Analyze Market Estimates

For some specific businesses that have a slightly more closed market and the type of procedure we speak of does not apply, it may be possible to analyze number of market growth, company value and quantity of company revenue in question.

This type of projection can be obtained using the business plan sheet.

4 Method: Point-of-Balance Projection

If you have no idea of ​​any value to design your sales, you can look inside your business with a break-even analysis. The process is quite logical, although it is not simple 100%. You start with a list of your products (in our case below I used an example of a clothing store):

Break-even worksheet - top

See what it is important to know what your approximate selling price and sales projections are. If you have no idea, you can kick values ​​and then go about working with different scenarios. After that, list the direct costs:

Break-even worksheet - variable costs

This is already the main way to discover your contribution margin:

Break-even worksheet - contribution margin

Along with the fixed costs you reach the point of balance, which roughly is a sales projection necessary for you to have no loss. Look:

Sales forecasting - Break-even analysis

Since there are several products, the amount of projected sales is general, if you want, you can do this more detailed analysis per product, to have a forecast of quantity for each item that makes up your business:

Break-even worksheet - Break-even point by product

Regardless of the method chosen

Have a second look at the numbers obtained. For this, ask for an analysis and opinion of a partner, compare your projections with the competition when possible and evaluate your data with the projections published in specialized magazines and websites.

Economic Feasibility Study Sheet

Simplify and track results

As can be seen in each of the aforementioned methods, the sales forecast should be a simplified process, since its success will also occur with the constant monitoring of the processes. In other words, it is no use developing a complex sales forecast and not being able to keep up with the essential data and then adjusting them if necessary.

Thus, in selecting the desired method it is essential that there be a simplification, working only with the essential data in the projection and accompanying the results of the projection without difficulties.

Lastly, it is worth pointing out that even if a business has seasonal highlights or maintains sales constancy throughout the year, it is always necessary to adopt sales projections to keep their feet on the ground in relation to sales expectations, so analyze the data objectively and be prepared in the projected timeline.

customer prospecting worksheet

And you, how do you design your company sales? Leave your comment below!

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