Sales Forecasting for Non-Number People: Easy Steps for Small Business Owners
Forecasting is intimidating to most people, even including accountants, tax advisors, and financial analysts. To get forecasts “correct” you need a significant amount of data and rarely does that data exist. Even in very large companies with significant data, forecasting is elusive.
So what do you do when you have a small business and want a robust revenue forecast?
In this article, I’m going to walk you through what kinds of forecasts matter, which ones to use for what purpose and how to simply think through a revenue forecast that isn’t daunting. By the end of reading this you should have a basic understanding of the next steps you can take to get super clear on your business’s revenue forecast.
What is a Sales Forecast (and Why Does it Matter)?
A Sales or Revenue Forecast (Sales & Revenue will be used interchangeably for the remainder of this article) is a simple plan that helps you gauge when cash is going to come into your business. It doesn’t need to be fancy or use a specific tool and there’s no “WRONG” way to forecast. A sales or revenue forecast should help you:
Plan where to allocate your expenses
Inform when you can or should hire to increase revenue
Reduce cash surprises and give you a sense of peace
Make confident business decisions
Understand where you’re sales strategy is lacking
A business without a sales forecast cannot accurately understand how to:
Generate more revenue
Know what kind of sales and marketing activities work and don’t work
Plan for cash flow
Pay the business owner well and consistently
Manage emergency situations
If you take one thing away from this article it should be this:
Don’t skip forecasting your revenue…. ever.
Different kinds of forecasting
Before you start a forecast. You want to know your goal and audience for that forecast.
Typical Goals for the forecast:
Key decisions such as: hiring, new product development, scaling
Raising Capital
Seeking a bank loan
Ongoing financial management
Each of these 4 goals above are going to determine the length, the layout, and level of detail specific to the story you’re trying to tell. They’re each for a different audience and should be adjusted as such. It doesn’t mean the numbers are going to be wildly different, but you’re going want them to be tailored for that specific purpose.
Here’s a few examples:
I used to do a lot of forecasting for business owners seeking investor financing. Those forecasts were a typical hockey stick forecast where revenue continued to go up exponentially over time. They weren't meant to be conservative. There were very little assumptions built in backwards looking data and often they went off of the size of the market rather than any customer data.
Contrast that to an internal forecast for accurately predicting cash flow and you’ll see a wildly different number that buffers cash and is much more conservative. These are not the same forecast but can both exist in a business and both be accurate to the goals they're trying to achieve.
This is the number one thing that trips up owners when they work through forecasting.
Always keep in mind:
Forecasting is a creative activity
Forecasts are usually wrong but still required and helpful
Not confusing at all! :)
How to Start Forecasting (Even if You’ve Never Done it Before)
If you have been in business for a while (let’s say 3+ years with a consistent product or service), then forecasting is significantly easier. Let’s use a business that’s been in business for 10+ years and has consistent backwards looking revenue as our first example. How would we start a forecast?
Review 3 years of past sales data
Remove products or services that don’t exist
Review the sales & marketing channels and metrics for sales & marketing
Build a strategic plan for the next 12-18 months
Plan for the next 12 months based on past actuals and current sales & marketing metrics
Build Excel.
Done. jk… there’s more to it than that
Always start with the strategy. Even if you have 3 years of data for existing products or services, you may be looking at scaling the business, increasing margins, or what I’ve seen a lot this year is businesses with shifting customer behavior and markets. So that data that looks back is only a little bit helpful. In that case, we want to HEAVILY rely on the sales and marketing tactics that are happening today, understand the conversion rates, and work backwards into revenue from the actual conversion rates and then see what can be achieved. THis is going to provide a much more robust forecast than only aligning to backwards looking data.
Another example that comes up a lot is high growth businesses, this is any business that’s going to grow more than say 3-10% in year over year revenue. This is another situation that involves a lot of guess work. Sometimes when we’re presented with how do we go from $1m in sales to $5M in sales, I”ll ask the client to bucket revenue and see how revenue needs to grow monthly to get the results and then after that we'll look at how many customers that will be and what’s needed to get there. IN this scenario, we’re usually not focusing on the current sales & marketing numbers because to get from $1M to $5M or $5M to $20M a business is going to have to drastically shift what they’re doing today to something else so we need to first look at revenue (usually target setting) and then have discussions around the how to make it happen.
Lost yet? Don’t be. There’s multiples ways to build a good forecast and there’s lots of ways to use them. You don’t even need to get this detailed.
If you’re just staring out and want the “math only” version you can also just do this:
Customers or sales per month x $per customer = Monthly revenue
Start here, pull it out the number of months you want to forecast
Start looking at expenses to support those customers
Continue to refine as you get more comfortable
Over time you will improve your forecasting ability
Don’t expect perfection, work on progress
Tools and Templates to Make it Easy
I get asked ALL THE TIME what my favorite budgeting and forecasting tools are and I will say this 1 million times if I have to - it is the tool or tools that work for you. Doesn’t matter what I say, what I like or what I use. You must use a tool that you will use. I don’t care if it's a pen and paper, an excel file, a google sheet, a fancy forecasting software, or AI. If you don’t use it - it is USELESS!
Here’s what I like to do for forecasting:
Start with the thinking - check out my Annual Planning Guide to help frame up the goal. This is a pen, paper and hopefully a nice coffee on a bench outside or wherever you do good thinking
Then open a spreadsheet (Excel or Google Sheets - if you’re comfortable with them)
Then work on your revenue
Then add expenses
Then if you want it all in a nice buttoned up tool, use something like Jirav or Fathom or the many other tools out there. Even Quickbooks has a budgeting tool you can upload to and report on. Try a few and use what you will use. It doesn’t need to be fancy.
Then review your forecast and expenses each month and adjust as you go
I want to add one note on this. The thinking is what matters most, in my experience once numbers are in a spreadsheet the critical thinking stops and we as humans get anchored to unrealistic numbers. This is why I cannot stress enough - build your strategy first, use a pen and paper to brainstorm, know your goals and then put it all together.
When I work with clients through forecasting outside of CFO services we spend 4-6 weeks working on 1 scenario and then build others for decision support. I work hard to understand first, push them on strategy, push for what they really want and then we build drafts, adjust those drafts, adjust again, and even then it’s going to be incomplete because forecasts are the same as the weather - they’re not real until it’s real.
My free resources/templates that can help:
How to Use Your Forecast to Make Better Decisions
Forecasting at it’s core isn’t about being correct - because it won’t be. It’s about helping make strategic decisions. So when you have a forecast built, the worst thing you can do is set it and forget it. It doesn’t do you much good to build a forecast and never look at it.
However - it does you LOTS of good to use forecasts when you have a big decision to make and you may need to build a one-off forecast for a particular decision.
Here's few examples:
Hiring: Know when you can afford to bring on help
Spending: Plan for big purchases or investments
Cash flow: Anticipate slow periods and avoid surprises
Example: “If your forecast shows a dip in July, you can plan ahead.”
Common Mistakes (and How to Avoid Them)
Making it too complicated
Keep it simple. Keep it useful. Keep it updated.
Not understanding your business economics.
A forecast does need to fully understand all costs associated with running your business. Think of things like: damages, client cancelations (churn), hiring mistakes, refunds, what else can go wrong? What other little expenses have you not thought about? Always add a few buffers for unexpected expenses.
Ignoring one-time costs.
I pay my business insurance in a lump sum once a year. I plan ahead for this cost so it doesn’t surprise me.
Not re-forecasting all the time
You don’t need to update a forecast weekly or even monthly if it works for you. But you should update it quarterly and look ahead each month to see if you may need to re-forecast. Economic and market shifts happen frequently and usually catch owners off guard.
Being too conservate
It’s good and okay to let yourself dream of growth. Set BIG goals and see what it takes to achieve them AND have a conservative cash flow version of that forecast to buffer for unexpected expenses.
Not using the forecast to make decisions
Every time you have a decision - pull out that forecast, adjust the numbers for that decision and help it inform next steps.
Conclusion & Call to Action
Stressed about forecasting? Let that stress go and just play around with your big goals. If you still struggle, reach out and my team and I can help get guardrails around that forecast.
Check out our freebies for resources to help small business owners with finance. Finance Fight Club Freebies
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About the Author:
Natalie Cook is the founder of Finance Fight Club, an Outsourced CFO & Financial Services firm dedicated to empowering small business owners with strategic financial guidance. With 5+ years of experience as a fractional CFO, Natalie specializes in due diligence, cash flow optimization, and preparing businesses for sale. Her insights have helped countless entrepreneurs confidently navigate complex financial decisions, from scaling operations to achieving successful exits. Connect with Natalie on LinkedIn for more expert advice on business finance, or explore Finance Fight Club’s resources at financefightclub.com to transform your financial future.
Sales Forecasting FAQ for Small Business Owners
Q1: What is a sales forecast and why does my business need one?
A sales forecast is an estimate of your future sales revenue over a set period. It’s essential because it helps you plan for expenses, manage cash flow, make hiring decisions, and set realistic business goals. Without a sales forecast, it’s hard to make confident, informed decisions.
Q2: How do I create a sales forecast if I’m not a “numbers person”?
Start simple:
Estimate how many customers or sales you expect each month
Multiply by your average sale amount
Use a spreadsheet, pen and paper, or a free template (like those at Finance Fight Club Freebies)
Don’t worry about perfection—just get started and refine as you go.
Q3: How often should I update my sales forecast?
Review your sales forecast at least quarterly, or whenever you experience major changes (like launching a new product or seeing shifts in customer demand). Regular updates help you stay on track and adjust to changes quickly.
Q4: What are the most common mistakes in sales forecasting?
Making it too complicated
Ignoring one-time or seasonal expenses
Not updating the forecast regularly
Not using the forecast to guide business decisions
