As an SME business owner, you are constantly juggling multiple responsibilities. From managing operations to growing your customer base, it can be easy to overlook the crucial process of sales forecasting.

However, effective sales forecasting plays a key role in your business’s long-term success and sustainability.

What is sales forecasting?

Sales forecasting is the process of estimating future sales based on historical data, market trends, and other factors.

This practice enables business owners to make informed decisions about their operations, marketing and finances.

By providing a clear picture of your expected revenue, a sales forecast helps you identify potential risks and opportunities, manage your resources effectively, and drive growth.

Why is sales forecasting important for SMEs?

Sales forecasting gives you a window into the expected income of your business and can help to identify new opportunities, but there are other benefits as well:

  • Financial planning: Sales forecasting is the foundation for all financial planning, including budgeting and cash flow management. Accurate sales predictions can help you make well-informed decisions on when to invest in expansion, allocate resources, or cut costs. This can be especially crucial for SMEs, where financial resources are often limited.
  • Inventory management: A reliable sales forecast helps you avoid stockouts and excess inventory, which can lead to lost sales, dissatisfied customers, and increased costs. By anticipating demand, you can optimise inventory levels, minimise waste, and ensure that you always have the right products available at the right time.
  • Workforce planning: Sales forecasts can help you determine if you need to hire additional staff, train existing employees, or adjust work schedules. This can be particularly important for SMEs that experience seasonal fluctuations in demand or plan to launch new products or services.
  • Goal setting and performance measurement: Setting realistic sales targets based on accurate forecasts can motivate your team and provide a clear direction for your business. Additionally, comparing actual results to your forecasts can help you measure performance, identify areas for improvement, and adjust your strategies as needed.

Methods of sales forecasting

There are several approaches to sales forecasting, and the best method for your SME depends on the nature of your business and the data available. Here are three common methods:

  • Historical data analysis: This method involves analysing past sales data to identify patterns and trends. By adjusting for factors such as seasonality, new products, or market changes, you can develop a sales forecast based on historical performance.
  • Market research: This approach uses external data, such as industry trends, competitor performance, and economic indicators, to project future sales. Market research can be particularly useful for SMEs entering new markets or launching new products.
  • Sales funnel analysis: This method focuses on your sales pipeline, analysing the different stages of your sales process, and estimating conversion rates. By understanding how leads move through your funnel, you can develop a more accurate sales forecast and identify areas for improvement. CRM systems can help with this analysis.

Struggling with your sales forecasting, follow these useful tips:

  • Collaborate with your team: Encourage input from sales, marketing, and other relevant departments to ensure that your sales forecast reflects a comprehensive understanding of your business.
  • Regularly update your forecasts: As new information becomes available, revisit your sales forecasts to adjust and maintain accuracy.
  • Use multiple methods: Combining different forecasting methods can provide a more accurate and comprehensive outlook, allowing you to make better-informed decisions.
  • Learn from your mistakes: Track the accuracy of your forecasts and analyse any discrepancies to continuously refine your forecasting process.

Sales forecasting is an essential component of managing and growing a successful SME. By understanding the importance of sales forecasting and employing effective methods, you can improve your financial planning, inventory management, workforce planning, and goal setting.

If you need assistance with sales forecasting, please contact our specialist accounting team at or 01494 552100 or your usual Seymour Taylor representative today.


This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 31 May 2023.

Posted in Blog news.