sales forecast | 11 mins read

How to Calculate Your Sales Forecast Without Breaking Into a Sweat

how to calculate your sales forecast without breaking into a sweat 1646885069 1483
Archita Wagle

By Archita Wagle

What is a Sales Forecast?

Sales Forecast can be defined as predicting a company's future sales revenue based on historical data, industry trends and status of current sales. Sales forecasts are used to estimate weekly, monthly or annual sales.

Restaurant owners use sales forecasts to plan their operations, manage inventory and ensure the right staffing to handle future business. Sales forecasting provides restaurants with realistic estimates about the quantity of goods or services that can be sold, the cost of goods sold and expected profits. This information can then be used to make intelligent business decisions going forward.

Listed below are the steps that form the basis of a sales forecast-

Current conditions- The condition of the economy and your specific market can affect the future sales of your business. If the economy is booming, then sales may go up, but if the market is declining, it may have an adverse impact on sales. Sales forecasts should have an estimate of the growth rate of the market.

Regulations- A change in regulation or state or federal laws can have an impact on the sales forecast.

Product line- The launch of a new product or service has greater chance of a positive impact on sales, but a decline in existing sales may drive down the sales forecast. One has to also take into account money spent on marketing campaigns and labour costs and how they might affect sales.

Sales staff- Sales forecasts may be affected by any new campaign which may require hiring more people for the sales team. Sales reps leaving the company or newly hired can also impact the sales forecast.

How Does a Business Benefit from Sales Forecasting?

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Sales forecasting can influence every big decision in a restaurant. An accurate sales estimate helps a restaurant decide the best time to open a new branch, inventory for the next cycle, and the number of employees required for staffing shifts.

Here are some benefits of using sales forecasting-

1. Achieves targets- A sales forecast helps a restaurant achieve its revenue and profit targets by looking at the historical data of sales, marketing plans, and costs that can affect profits, such as labour and production. As per statistics, 97% of companied which forecast sales can reach their sales quota, compared to only 55% who don't use sales forecasts.

2. Helps growth- Sales forecasts can identify early warning signs in the production line or sales process by looking at market conditions. As per data, companies that use sales forecasting see 10% more growth in annual revenues.

3. Improves Customer Understanding- Sales forecasting is a data driven sales process. By looking at past sales data, it helps better understand customer preferences and market trends. Sales forecasts help companies predict future sales, improve pricing and product development.

4. Better analysis- A sales forecast helps you figure out how much a particular product contributes to your overall revenue. It also indicates the number of staff required to achieve the targets it sets.

5. Streamlines operations- Sales forecasts help businesses estimate profits and revenue based on short and long term performance. They help manage inventory optimally and enable a business to negotiate for better terms while seeking financing.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

Traditional Methods of Sales Forecasting

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Forecasting is an important subset of the demand planning function of a business. Companies that have access to historical data for past sales are better placed to predict future sales accurately. But new companies have to rely on external information, like market research statistics to make their sales forecasts. Using forecasting methods best suited to their business model can help restaurants make important decisions about short term sales strategy and long term growth objectives.

Let's take a look at a few traditional sales forecasting methods-

1. Surveys- This method to forecast sales is used for short term forecasts. It conducts surveys with customers, business owners and market experts to gauge customer demand and market trends. This method surveys primary sources of information and is simple to implement. Collective opinion can also be clubbed with the survey method, as it relies on the opinion of business owners to assess the market and economy. This method is good for new businesses and new products.

2. Sales cycle forecasting- This method takes an objective look at the sales lead data. It requires collaboration between the marketing and sales teams, which is crucial to the success of the sales cycle forecast. This method tracks and collects accurate data on the progression of the sales pipeline.

3. Multivariable analysis forecasting- This forecasting method is considered the most accurate and sophisticated of all. It considers average sales cycle length, sales rep performance, and sales closing probability. This method of sales forecasting is not suitable for small businesses because of the advanced analysis required.

4. Historical forecasting- The easiest and quickest forecasting method, it uses past sales data with the assumption that sales will be similar or higher in a similar time period. But this method of sales forecast doesn't take into consideration seasonal changes or demand variations.

5. Pipeline sales forecasting- This method to forecast sales assesses sales opportunities in the sales pipeline to evaluate the likelihood of closing a deal. It also factors in sales rep statistics and opportunity value and relies on high quality, clean data.

How to Calculate Your Sales Forecast

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A sales forecast is an important step for a restaurant to plan its growth, revenue and profits. Sales forecasts provide crucial insights that make sure to optimize overall productivity. An accurate sales prediction is a vital workforce management solution.

If you want to create your own sales forecast consider the following steps, or use a sales forecast template that's available online-

  • Establish a sales process
  • Set quotas for the team
  • Choose a sales forecasting method
  • Include marketing, product and finance data
  • Review prior sales forecasts

In order to accurately calculate sales forecasts, it's necessary to track sales data. Opt for a reliable software can simplify the process of tracking sales data. After determining the sales cycle or the period for which you want to forecast sales, consider the process of forecasting sales for drinks or entrees, and choose a forecasting method for calculating accurate sales estimate.

Now comes the main part of sales forecasts the formula. One of the simplest ways to get sales for a month is Total sales revenue till now / number of months till now = average monthly sales rate. To calculate the sales for a year, the formula is Average monthly sales rate x number of months = Possible sales revenue for the year. The final sales forecast formula is Total sales revenue + possible sales revenue for the year = annual sales forecast

You can also multiply your total annual sales from last year by the rate of inflation to guess your sales for the next year Total sales last year + (total sales for the past year x rate of inflation) = annual sales forecast.

A sales forecast example can be if a restaurant had $120,000 sales in 2021 and the rate of inflation was 5% hence the formula would be Total sales last year + (total sales last year x rate of inflation) = annualsales forecast or $120000 + (120000x5/100) = $126,000

Benefits of Sales Forecasting Software

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After looking at benefits of opting for sales forecasting to make sure that the business gets maximum revenue and profits, let us now look at benefits of opting for a sales forecasting software to forecast sales.
1. A sales forecasting software uses past sales data from the Point of Sale system to present a clear view of past sales and makes it easier for restaurant owners to make decisions and spot trends. A restaurant forecasting software has major benefits for business profitability and longevity-
Accurate estimates- Owners can often overestimate the sales data and predict more than the actual capacity of the restaurant. Using a sales forecasting software increases the accuracy of sales forecasts. Data shows using a software for sales forecasts can give more 95% accurate predictions. The accurate sales data helps a restaurant make data driven decisions for optimized restaurant management.
2. Forecast variations- The software used to forecast sales has unbuilt tools to account for variations that restaurant owners may fail to account for during the sales forecasting process. For example, an unexpected change in weather could result in completely different food or labor costs than the projections. When a business gets a better understanding of the trends, the overall working of the restaurant, from employee scheduling to inventory management will benefit.
3. Reduce labour costs- Using a software for accurate sales predictions will also help optimize food and labor costs. Accurate forecasts will cut down unnecessary labor costs as the software help execute optimal employee scheduling. Sales forecasting software can help your restaurant predict the number of customers per shift and you can arrange staff schedules accordingly.
4. Inventory management- A forecasting software helps a restaurant cut down on food costs as food waste, which is a result of improper inventory management, is reduced. Using historical data to predict future sales will help a restaurant make sure that it optimises food costs.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

Top 5 Sales Forecasting Software for Restaurants

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After discussing the need for sales forecasting and opting for a forecasting software, let us now take a look at the top options for sales forecasting software-
1. Zip Forecasting
The Zip Forecasting app from Hubworks business management app store automates sales forecasts and demand planning. The app can access real time and historical data from point of sale (POS) and inventory tracking software to improve forecasts.
2. Toast POS
Toast POS is a tool targeted at only US-based businesses. The management software offers tools for inventory management and sales forecasting. It also offers automation of loyalty and discount workflows and and offers digital tools for payment.
3. TouchBistro
TouchBistro is a management platform which can automate every business function. The software offers tools for sales forecasting and employee scheduling and can be operated on local networks. The software can also staff scheduling tools software to power your restaurant's forecasting functions.
4. ePOS
ePOS is a management software that offer real time sales forecasting, inventory management and integrations with over 100 apps. It allows you to access your business from any device. It uses insights and reports to reduce costs, save time and boost profits.
5. Oracle Hospitality
Oracle Hospitality offers a range of software, hardware, and cloud based solutions for restaurant management. It provided POS systems that can help track sales and make sales forecasts. It can also provide insights into client behaviours.


Sales Forecasting FAQs

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What happens if the sales forecasts are inaccurate?
Understaffing due to inaccurate sales forecasts can lead to negative reviews and overstaffing can cause an increase in labour costs.
If staff is called in or sent home due to under or overstaffing can lead to an increase in employee turnover.
If inventory is not managed properly it can lead to increased food waste or stockouts, which can lead to running out of key items leading to unhappy customers.

What are the three main sales forecasting techniques?
There are three techniques which a business can use for sales forecasting-
AI-enabled- The approach uses insights from historic data and current market information to give a more realistic picture of factors that can impact sales revenue. It makes use of sales forecasting tools to analyse data.
Quantitative- It is a data driven approach to predict future sales and revenue
Qualitative- It is an opinion-based approach to predict sales volume can be expected
Most of the businesses still opt for quantitative and qualitative sales forecasting techniques.

What is sales management?
Sales management is a process which starts with sales forecasting, building a sales team, coordinating sales operations and then implementing sales techniques which can help a business to achieve its sales targets. A proper sales management system can minimise admin tasks and centralise customer information to increase team effectiveness.

What is a sales cycle?
A sales cycle is sales process which starts with approaching a customer and ends at closing the deal and follow-ups. A typical sales cycle has stages such as 'prospect,' 'connect,' 'research,' 'present,' and 'close.'

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