Use my handy sales forecasting exercise & forecasting tool to help you anticipate your Q4 or holiday sales. Prepare your physical inventory & your workload accordingly!
E-commerce sellers and business owners start to think about preparing for the holiday sales rush around the middle of the year (hopefully? 🤣). If you’re new to selling, or perhaps especially if you’re NOT new to selling, you may be curious what to stock up on for the upcoming holiday season.
Through this post & the accompanying video, I will walk you through how to forecast your sales, product mix, and inventory for the holidays. Get prepared – stock up on the supplies you need, start making or preparing finished goods, and breathe easy once November hits! It’s always my goal to help you be in proactive mode, rather than reactive.
We’ll forecast sales based partly on three things – 1) what happened last year, 2) what’s happened so far for your business this year, and 3) your intuition!
We’ll look at your sales totals & sales by product category for last year and year-to-date, so the more data you have on hand to work with, the better.
1. Examine last year’s Q4 or holiday sales by product category.
Try to categorize your products in 10 or fewer general types or buckets. Consider the number of each product type that sold last holiday season (or all of Q4 if that’s easier!). The calculator will automatically tell you the percentage of your total sales that particular product category was responsible for.
Enter your total sales revenue for the same time period.
What’s this telling you?
This gives you a baseline to start with. We’ll use those percentages of total sales to analyze how sales might go this year.
2. Examine your year-to-date sales by product category.
Take your same product categories and enter the number of each type sold for the current year. You can look at January through whatever time period you’re at now.
Once again, enter your total sales revenue for the same time period.
What’s this telling you?
This lets you see any new trends or increases/decreases in popularity of certain types of products. We’ll combine the percentages here with what you experienced last year to make an educated guess about what will happen this holiday season.
3. Consider your sales growth trend year to year.
Enter your sales total from last year for the same time period you just looked at sales for the current year (so likely last year’s January through July or whatever month you’re currently in!).
Compare that total revenue to the same time period for this year. What’s your growth rate or decline rate?
What’s this telling you?
It’s likely you’ll see your holiday sales grow or decline near the same rate you’ve seen your YTD sales grow or decline. We can use this trend to make an educated guess at how much our holiday or Q4 sales total will be – essentially forecasting your holiday sales total.
4. Apply this takeaways to your holiday sales goals.
This time we’re working backwards, starting with your total revenue goal and breaking that down to product category goals. This is where the magic happens!
- Enter your Q4 or holiday sales goal (total revenue for that time period). Base this goal on what happened last year, your growth/decline rate so far this year from last year, and what your intuition is telling you. In my example, I decided to push a little past what my growth rate predicted and landed on $6100.
- Divide your holiday sales goal by your current average order value. The calculator already populated your AOV in step 2. The spreadsheet will take your new sales goal and divide it by that AOV to determine your orders goal. In my example, if I want to hit $6100 in sales and my AOV this year has been about $28.21, then I will sell about 216 items to hit that goal.
- Apply your estimated percentage of total sales to your new orders goal. Go through each product category and enter an estimated percentage of total sales that particular category will be responsible for. You can again base this estimate on what happened in last year’s holiday season, what’s happened so far this year, and what your intuition says. These estimates should all add up to 100%. It’s ok to tweak as you go. You know if you have certain products that sell really well at the holidays in particular!
Want to see this holiday sales forecasting process in action?
I’ve got a whole video that dives deeper into each step of this process. Make sure to watch it if you have questions about:
- how the worksheet works
- how to categorize your products in a way that makes sense
- where to find this data for your business
- what to do if you don’t have a lot of past data to base your estimates on
So now that you’re hopefully left with an educated estimate of what product categories will sell this holiday season, you can get to planning! Consider these questions:
- Do you have enough raw materials & supplies to make these predicted quantities?
- What do you need to order, and when? You may have enough time to take advantage of sales or discounts if you plan your purchases accordingly.
- Do you have the budget to stock the supplies & raw materials you need? If not, what tweaks to your spending or product line can be made?
- Do you have the time, energy, and physical space to create these predicted quantities?
- Are there adjustments you need to make to your creation process or workspace in light of this info?
- Is it time to increase your prices to better handle possible demand?
- Do you need to hire any extra hands or help for the holiday season?
- Are there any other materials you need to stock like shipping or packaging items for these predicted quantities?
- Can you start making any of these products now? If not and your products are made-to-order, are there portions or pieces of the product you can create in advance?
- Should you start modifying, tweaking, or polishing these product listings prior to the holiday rush?
I hope you found this inventory forecasting exercise helpful!