What a sales forecast is, and what it's for
A sales forecast is your best estimate of how much you'll sell in a coming period: next month, next quarter or the rest of the year. The number goes to whoever needs it, such as a founder planning hires, a manager setting targets or an investor asking about the quarter.
A forecast doesn't need to be exact to be useful. It needs to be close, honest about how sure it is, and early enough to act on. A forecast that says in the first week of March that the quarter will come in short gives you three weeks to fix it. One that says it on the 29th is a report.
Big vendors sell forecasting software with AI models and dozens of inputs. A team of 3 to 30 can do well with a spreadsheet and three methods, each checking the others.
Method 1: from your past months
The simplest forecast takes what you sold in the same period before and adjusts it for what's changed.
Made-up example: a team sold $120,000 last October and $135,000 last November. Since then it's added one rep to the four it had, but the new rep only started three weeks ago.
Last October's $120,000 across four reps is $30,000 a rep. The new rep won't sell a full share yet, so count them at a third: 4.33 reps at $30,000 is about $130,000 for this October.
It's quick, and it's the right starting point when your sales are steady. It misses anything new: a big deal in the pipeline, a slow month of prospecting, a price change. That's what the next two methods catch.
Method 2: from the weighted pipeline
Take every open deal expected to close in the period, and multiply its value by the chance it closes at the stage it's in. The chance should come from your own history: of the deals that reached this stage before, how many closed?
Made-up example: a team's open deals for October, with the share of past deals that closed from each stage:
- First meeting done: $150,000 of deals, and 20 in every 100 closed from here before. Counts as $30,000.
- Proposal sent: $90,000, and 45 in every 100 closed. Counts as $40,500.
- Verbal yes: $60,000, and 85 in every 100 closed. Counts as $51,000.
The weighted pipeline for October is $121,500.
The pipeline value page has the formula and a calculator. Two rules keep the number honest. Use your own close rates, not a vendor's default percentages. And ask reps to move a deal's close date when it slips, not leave it sitting in October.
Method 3: from this month's activity
The third method works forward from what the team is doing. It needs three numbers from your own past: how many calls it takes to book a meeting, how many meetings turn into a deal, and your average deal size.
Made-up example: over the last quarter, the team booked one meeting for every 8 calls, one in 5 meetings became a signed deal, and the average deal was $6,000.
This month the team is on pace for 480 calls. That's 60 meetings, 12 deals and about $72,000, closing over the next month or two, depending on your sales cycle length.
This method is the early warning. If calls drop in the first two weeks of a month, the activity forecast drops with them, weeks before the pipeline shows it. It's also the one a manager can do something about by Wednesday.
The activity method needs your own conversion rates. ActivityTracker counts them at every step, from appointment to signed deal, from what your team already logs, and names the weakest step.
Put the three together
Lay the three numbers side by side for the same period:
| Method | What it says | What it's good at |
|---|---|---|
| Past months | About $130,000 | A steady baseline |
| Weighted pipeline | $121,500 | Deals you can name |
| Activity | Deals for the next month or two | Early warning |
When the first two agree within about a tenth, forecast somewhere between them and say how sure you are. When they don't, the gap is the conversation. A pipeline well under your past months means the team hasn't built enough deals. Check pipeline coverage for how much open pipeline you need against the target.
Give the forecast as a range with a middle figure, like "$120,000 to $135,000, most likely $125,000". A single number sounds more certain than any forecast is.
Check the forecast every week
A monthly forecast made once is out of date by the second week. Five minutes every Monday keeps it useful:
- Update the weighted pipeline: deals that moved, closed or slipped.
- Compare last week's calls and meetings with what the activity method assumed.
- Write the new range next to last week's, and one line on what changed.
- If the range has dropped below target, decide this week what to do about it: a call block, help on a stuck deal, a push on proposals out.
After a few months, compare what you forecast with what you sold. If you're always high, your close rates are too generous. If you're always low, your reps are sandbagging, or the team is better than your history says.