Different company has different sales forecasting process.  There is no one sales forecasting process that is applicable to all companies.

Here I am going to show an example of a sales forecasting process used by Credit Card Companies.  The sales forecasting process used here could be applicable to some other kinds of businesses.

Have you ever wonder why many credit card companies can afford promotions that offer free credit card plus welcome gift to new customer.  Before coming up with such offer, the credit card companies did a lot of financial forecasting, financial budgeting and financial analysis to ensure that it is still profitable after implementing such promotion.

One very simple financial key performance indicator (KPI) they use is ‘Average Revenue Contribution Per Cardholder’.  After knowing this KPI, the credit card companies can determine how much to spend on their card marketing promotion campaign.

For example, the above average revenue contribution per cardholder is $1,000 per year.  By apportioning 15% of it means the credit card company can spend $150 on the free card marketing promotion campaign.  Since the card membership fee is an internal generated revenue, the cost is minimal. Therefore, a big portion or all of the $200 can be spent on welcome gift and can be easily recovered in the first year.

If the credit card company aims to selling 50,000 for next 12 months, the card acquisition cost would be 50,000 cards x $150 which is equal to $7,500,000.

If the new cardholders can meet the revenue target of $1,000 per year, the total revenue derived from these new 50,000 cards for next year would be 50,000 cards x $1,000 = $50,000,000.

Putting these two equations together you would get a net revenue contribution of $42,500,000 ($50,000,000 – $7,500,000) for next 12 months.from the new 50,000 cardholders by launching the free credit card promotion campaign.

Please note that this revenue of $42,500,000 is before other operating expenses.  Well this revenue is very lucrative isn’t it.