Create a killer sales forecast in six steps

Predicting your business’s future is impossible. But forecasting your financial outlook is essential, especially in 2025, as declining consumer spending and rising costs continue to disrupt cash flow for UK businesses.

Guided by your business plan template, sales forecasts form predictions about your future revenue in a given time frame, helping you to identify gaps in performance and address cash flow changes. Sure, crunching the numbers can be daunting, but you don’t need a degree in accounting to make a sales forecast – just your historical sales data and a solid plan.

This guide walks you through the various steps it takes to create an accurate sales forecast. We also break down the difference between different models and offer tips for using your forecast to help give you a fuller picture of where your account books are taking you.

What is a sales forecast?

A sales forecast uses historical data to estimate how many products or services a business will sell within a specific timeframe, such as a month, quarter or year. 

More than just a prediction, sales forecasts function as a vital financial roadmap. They allow businesses to proactively anticipate future demand and clearly visualise their potential revenue streams. The tool can be used at any stage during a business’s operational cycle to drive more effective planning, smarter budgeting, and more impactful sales and marketing initiatives.

In addition to historical sales data, sales forecasts analyse other relevant financial information to predict future sales, and also factor in external elements like economic conditions, market changes, seasonality, and competitor activity to ensure the predictions are as accurate as possible.

What are the main types of sales forecasts?

There’s no one-size-fits-all way of creating a sales forecast. The model you choose will depend on your goals and your business. Here are the different ways of forecasting your sales:

• Opportunity stage forecasting (best for high revenue businesses with longer sales cycles): this sales funnel forecast method multiplies each deal’s potential value by its closing probability, based on its stage in the funnel, then sums them up. However, it’s important to point out that this approach doesn’t factor in an opportunity’s age, despite older leads being much more likely to close.
• Intuitive forecasting (best for smaller and new businesses): instead of relying on ample sales data, this forecasting method is driven by the subjective opinions and insights of sales teams and experts who have deep knowledge of the market. The model uses qualitative data, instead of statistical analysis, to drive predictions, making it better suited to smaller businesses without droves of historical data.
• Historical forecasting (best for established businesses with tons of sales data): this method is simple for established businesses, especially those with seasonality. It assumes future sales will match or exceed past results from equivalent periods. However, this model is less reliable in fluctuating markets as it assumes constant buyer demand, so it is generally best used as a benchmark.
• Length-of-cycle forecasting (best for businesses with consistent cycle lengths): this forecasting method examines the age of sales opportunities to predict closing times. This estimates future sales for a chosen period. Rely on robust CRM (customer relationship management) data, not sales reps’ feedback (who may underestimate speed), for the most accurate predictions regarding deal progression.
• Multivariable analysis forecasting (best for businesses in complex industries which require granular insights): the most sophisticated forecasting model considers numerous factors simultaneously using predictive analytics, incorporating factors like average sales cycle length, closing probability by opportunity type, and sales rep performance. While more accurate than most other methods, it requires advanced analytics solutions, making it less feasible for smaller budgets.

How to create an accurate sales forecast in 6 steps

Creating a sales forecast might seem like a daunting prospect. But by breaking the process into smaller chunks using the steps below, gaining a clear overview of your business might be easier than you think.

1. Define your goals

Before you sit down to start crunching any numbers, you’ll need to have an objective definition of success. This will obviously be very different for every business and will depend on the resources you have and what your long-term goals are.

To set a realistic goal, you can sit down with your sales representatives to understand what a feasible sales quota is. This will then serve as your financial baseline to better make your predictions and check whether you’re setting yourself realistic targets.

2. Compile historical data 

Your historical data provides a foundation for predicting future sales behaviour. So, before you start building your forecast, you’ll have to gather enough historical sales data to accurately identify patterns specific to your business and market. 

Collecting a record of your data isn’t enough, though. You’ll also have to ensure it’s organised into timeframes – whether it’s weekly, monthly, quarterly, or yearly – and segment your data by different metrics like different products or services and sales regions, to allow for more useful insights. 

If you aren’t already, we recommend using a CRM system during this step to centralise your business’s sales data for you. It’ll also categorise it into distinct categories automatically, saving you from having to do it manually. 

3. Carry out market research

Sales data alone will provide an incomplete picture of your business’s finances. So, it’s also important to research external influences like market conditions to gain a deeper understanding of future purchasing behaviour. 

This will include information about industry trends, fluctuations in consumer confidence, and external economic factors such as inflation and interest rates, as these factors can directly impact sales numbers. 

We also recommend researching competitor activity – including how your main rivals are performing, what products and campaigns they’re launching, and if any new players are entering the space – to help you understand how developments in your market could impact your future revenue. 

4. Choose a forecasting method 

Different sales forecasting models will be better suited to different businesses. So, it’s essential that you pick a method that aligns with your business’s maturity, goals, and resources.

If your business is in its early stages and lacks a large backlog of historical sales data, qualitative methods like intuitive forecasting will be a better route to go down. 

Alternatively, larger, more established businesses will be better off going for quantitative models like historical and multivariable analysis forecasting, as these methods are capable of yielding more accurate results.

Every sales forecast model has its limitations, too. So we recommend combining a variety of methods for more accurate, nuanced results.

5. Calculate your sales forecast

Now that you’re armed with the relevant data and a suitable method, it’s time to calculate your forecast. Building a sales forecast will look different for every business, and the process you follow will depend on the model you’ve chosen. 

For instance, if you’ve opted for historical forecasting, you’ll need to use your previous sales and expected growth rate to inform your future forecast. Businesses using the multivariable analysis approach, on the other hand, will produce their sales predictions by entering their data into an analytics software of their choice.

When creating your forecasts, we also suggest developing outcomes for the best-case, worst-case, and most likely scenarios. This way, you’ll be able to account for a range of different possibilities and will be better at mitigating potential risks in the future. 

6. Review and adjust your forecast regularly 

Your sales forecast isn’t a static projection, it’s a living document. So, after you’ve produced your initial estimates, you’ll be responsible for consistently tweaking your forecast so it’s still able to continually give relevant insights. 

The main way you’ll be able to do this is by reviewing its accuracy. Specifically, you’ll need to compare your real-time sales data to the forecast at regular intervals, i.e monthly or quarterly, to check whether results remain relevant. 

If your sales data and forecast differ heavily, you should carry out a post-mortem to understand why the results were inaccurate. i.e, was this inconsistency due to external factors like rising inflation costs, or internal business factors like poor lead conversions or underperforming marketing campaigns?

Take action on these findings, and adjust your forecast based on this continual feedback loop. This way, your sales forecast will be better equipped to guide your future financial and strategic decisions, no matter what curveballs you encounter down the road.

How can businesses use sales forecasts?

Sales forecasts have moved beyond simple spreadsheet calculations. Here’s a more detailed look at how businesses can use sales forecasts as a financial tool in 2025:

• To predict consumer demand: well-executed sales forecasts can accurately project the future sales volume of products and services. This helps businesses to get their ducks in order, ensuring that they have adequate stock, delivery materials, and resources to meet demand.
• To make better investments: sales forecasts help you understand what cash you have on hand to invest back into your business, allowing you to support your long-term growth without taking unnecessary risks. 
• To guide spending: by gaining a prediction of your future finances, it’s easier to set realistic spending limits across different departments, and avoid splurging beyond your means.
• To improve sales processes: sales forecasts hold a mirror to your existing sales processes, helping you understand which strategies are working well, and which workflows are ripe for improvement. 
• To highlight financial problems: by predicting future sales data, sales forecasts flag cash flow shortages before they occur. This foresight gives businesses a chance to make adjustments proactively to help their budget remain balanced. 

Sales forecasts offer useful insights into your business’s finances. But if you want to unlock more detailed information about your cash inflows and outflows, we’d recommend making a cash flow forecast instead.

Next steps

If you’re serious about growing your business, you can’t get by without a sales forecast. A realistic and well-structured sales forecast will act as a financial compass for your business, helping you reach your targets, make better data-led decisions, and allocate your resources more effectively. 

To make an accurate sales forecast, the devil’s in the data. Your accounting or CRM software is the best source, but you’ll definitely want to look at Year-on-Year growth, revenue, and market penetration as these can help identify gaps in performance and help you to understand what realistic goals look like.

Although sales forecasts are not crystal balls that can perfectly predict the future, they are useful, adaptable tools that help businesses navigate in the right direction. We recommend building one sooner rather than later, though, as waiting until tomorrow will only delay your business’s ability to prepare for potential financial challenges.