Enter the previous year’s sales and your average annual growth year to year into the calculator to determine a sales forecast.
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Sales Forecast Formula
The following formula is used to estimate a sales forecast.
SF = (1 + AGR/100) * PS
- Where SF is the sales forecast for the following year
- AGR is the average annual growth rate in terms of sales percentage growth (%)
- PS is the previous years sales
To calculate a sales forecast, divide the AGR by 100, add 1 to that result, then multiply by the previous years sales.
Definition
What is a sales forecast?
A sales forecast is an estimation of the future amount of sales a company will make in any given period. This can be on a scale of weeks, months, years, or any other time period. The most common forecasts are yearly and quarterly.
In order to make a proper sales forecast, a company must have a history of sales and growth in order to project into the future.
Example Problem
How to calculate a sales forecast?
The following example goes over the necessary steps in order to calculate or estimate a sales forecast.
First, determine the previous year or period sales. In this example, we will look at the last year’s sales. The company we are looking at had a total of $100,000.00 in sales.
Next, determine the average annual growth rate. This can be done by taking the previous 3 years’ sales growth and taking the average. In this example, the average annual growth was 5%.
Finally, calculate the sales forecast for the next year using the formula above:
SF = (1 + AGR/100) * PS
SF = (1 + 5/100) * 100,000
SF = $105,000.00
