Definition: The process of projecting what your sales revenue will be for a specific period in the future, i.e. in the coming year or quarter. An accurate sales forecast is important in order to understand and manage sales activities in addition to financial planning purposes such as managing cash flow and planning production & logistics capacity.
Top down forecast
A top down forecast will provide an idea of your revenue potential, for instance, it may give you an indication of the market size and market share for your venture. Examining variables such as market potential and adoption rate will help you to arrive at a revenue estimate.
The following are resources that can assist with finding these factors:
Target Demographics (market potential)
- Census of Canada
- Start at the Data & Statistics subject guide on the library website to find quick links to Census Profiles for local markets.
- National Household Survey (NHS)
- Start at the Data & Statistics subject guide and scroll down to locate quick links to NHS Profiles for local markets.
- Survey of Household Spending (SHS)
- Connect to CANSIM --> Enter SHS into the search box --> Select a table from the list by clicking on the table number.
- can be used to find articles that report on consumer spending behaviour in surveys.
- Click on "Subject" --> under "All Subjects" expand "Content Types" --> click on "Surveys/Polls"--> Enter product name or related product type in the search form. Narrow by date, i.e. "in the last 2 years". Also, can narrow by geographic region. To do so, click "Region". Search or browse for country/province/city name. Click on specific region to add to search. When ready to search, click the search button.
Bottom up forecast
For a bottom up forecast, you are looking at what you can do with more realistic information. Considering your Sales Funnel is key. Knowing how long it will take for customer X to make decisions and actually buy your product is critical, so also is determining what % of customers will make it through each stage. Key variables to be defined are: length of sales cycle, conversion rate, and the average selling price.
The following are resources that can assist with determining these variables:
- CBCA Complete
- can be used to find articles that include average retail or selling prices for your product. Start in the Advanced Search template and enter in your product name or product type in the search box, add the Boolean operator "AND" or the proximity operator "NEAR" then add "pric*". Example: (tablet NEAR pric*) or (tablet AND pric*)
- It provides pricing information. Connect to Passport -->click Industries tab at the top --> select an industry you are researching --> select Country Report under Analysis Finder --> select Geographies and click Go --> click on the titles that are relevant to your research --> click View Statistics under Related Statistics on the left side --> clicking green icon in the table for pricing information.
The bottom up approach will require primary research. You may want to consider contacting or visiting local stores/businesses related to your venture to get an idea about length of sales cycle, conversion rate, and average selling price. Scott’s Directories provides contact details for Canadian businesses. Contacting trade associations for your particular industry may also be useful. Locate specific associations and their respective contact information via Associations Canada (before running a search for a particular association, deselect all resources except Associations Canada.)