How to Create a Sales Forecast
Creating a sales forecast is hugely helpful in developing your sales plan. You'll have a much better understanding of which sales activities are most useful at the moment if you have a good idea of what your next commissions check will look like. No forecasting method is 100% accurate, but there's a simple method that will give you a good idea of what your status will be in the near future.
Start by listing all the prospects you have in your pipeline at the moment.
You'll want to keep modifying this list in the future, so you'd be advised to type it up in your spreadsheet program or word processor for easier updating later. Your list should contain four columns: the prospect's name, the probable value of the sale, the likelihood that you'll close that sale, and a final column to calculate the expected value.
The probable value column should contain your best guess as to the value of the sale, as the prospect stands now. For example, let's say one prospect is looking at a product priced at $500 and you think you'll be able to convince them to also get the maintenance plan, which is an additional $50. You would list that prospect's probable value at $550. Later on in the sales cycle, if he starts showing a preference for a different model, you can update that value number.
The likelihood that you'll close the sale is more difficult to assess.
Every salesperson has experienced sales that fell through even though they thought it was a sure thing. And sometimes you'll have the joy of a sale that seems lost but miraculously works out after all. Most of the time, however, you'll have a fairly good idea of where you stand right now for a given sale.
If you truly have no idea, you can always ask the prospect for feedback. The answer won't always be honest, but it'll give you something to work with. The number in this column should be written as a percentage: for example, if you think you have a 50-50 chance on a specific sale, write down 50% in the likelihood column.
Once you have those columns filled out, multiply the probable value by the likelihood percentage to get the expected value for the sale, which goes in the fourth column. The expected value for any one sale won't match the reality, since you'll either close the sale and get more or not close it and get nothing. But when you add up all the expected values for everyone in your pipeline, the resulting number should be pretty close to how much you'll actually bring in in sales from your current prospects.
You can further refine these expected values by assigning them to a timetable. Create a new chart with the prospect's name in the far left column and the months to come in the rest of the columns. Then for each prospect, place their expected value total in the column for the month when you think they're likely to close. If it's now February and a particular prospect seems like they'll take about another month to close based on where you are in the sales cycle, you'd put that prospect's expected value in the column for March.
Once finished you can total the month columns to have a good idea of how much revenue you'll be closing each month.
The forecasting charts that you've just created will need to be updated at least once a week, as you acquire new prospects and move old ones through the sales cycle. Spending a few minutes per day on this task will result in a much better idea of what you can expect in commissions for the weeks and months to come.