MaRS Library Bottom-up sales forecasting for pre-revenue startups
Forecasting is a term used to describe the process of estimating future sales and revenue. Even before you start having regular sales activities and revenue streams, it is important to understand how to create solid revenue forecasts. When done right, forecasting is a methodology that allows you to arrive at reasonably predictable revenue expectations.
If you have little or no experience with sales forecasting, this workbook will help you understand the basic approach for building a revenue forecast.
Download and use this workbook to:
- Identify the stages of your sales funnel.
- Develop timelines for your sales process, buying process and cash flow.
- Calculate your expected average selling price per sale.
- Estimate your selling costs.
To assist you in the sales forecasting process, we have created a series of three workbooks. To meet the diverse needs of startups in Ontario, the workbooks cover two different situations: pre-revenue/pre-sales (that is, before sales activities) and early-stage sales (that is, the onset of regular sales activities).
For the pre-revenue/pre-sales situation, we offer two workbooks:
- Bottom-up sales forecasting for pre-revenue startups: A way of calculating the potential revenue for your company for a specific period by multiplying the number of likely sales for each product or product line, the average value of sales, and when they are likely to occur.
- Top-down sales forecasting for pre-revenue startups: A way of calculating your potential revenue by starting your assessment at a macro level to find market size and potential market growth, and then estimating your own revenue as a function of your assumed market.
For companies with early-stage sales, we have a workbook to steer you through a bottom-up approach for basic sales forecasting and help you predict sales revenue by calculating the future value of your sales opportunities.
Note that most Sales Force Automation software (SFA) contains functionality for predictive analytics that can automate some of the forecasting process. Even if you have access to an SFA software package, we recommend going through this workbook, especially if you have little or no experience in revenue and sales forecasting and your company is just beginning sales activities. This is because you will not be able to benefit fully from an SFA tool until you develop a solid understanding of the variables that affect the accuracy of your forecast.
Bottom-up sales forecasting for pre-revenue start-ups
Become great at sales. Check out our free Selling for Entrepreneurs online course. It provides over two hours of expert sales instruction designed for startup founders who want to lead sales and accelerate company growth.
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