How to Create a Sales Forecast for Multi-Channel CPG Businesses

In our experience working with hundreds of entrepreneurs, we've found that an accurate sales forecast can significantly tip the scales toward success for small businesses. In this post, we'll explain the basics of creating a sales forecast tailored specifically for multi-channel CPG businesses with diverse product portfolios.

(We'll use an emerging wine business as a sales forecast example, but these methods apply broadly to CPG businesses with various distribution channels and product categories.)

What is a Sales Forecast?

A sales forecast is a prediction of future sales volumes and revenues based on historical data, current market trends, and expected business activities. Having a reliable sales forecast provides clarity and direction for budgeting, inventory management, and overall strategic growth.

In our winery sales forecast example, accurate forecasts allow effective resource management, increasing profitability across key sales channels, such as Tasting Room, Third-Party Events, Wholesale (Retailers), Online Sales, and a new Membership Club.

How to Start a Sales Forecast Using Historical Data

A reliable sales forecast begins with reviewing your previous year's actual sales data. Ideally, this sales data should be segmented month-by-month, broken down by sales channel and product type. In our wine business scenario, data would be segmented clearly across all mentioned channels, with further segmentation by different wine types.

(You can copy this template from here and use it as a starting point.)

Segmenting your data this way forms a solid foundation, enabling you to identify sales patterns such as seasonal peaks, and anticipate future trends.

If detailed historical data isn't available at every product-channel intersection, that's okay — the goal of the sales forecast is to create an informed guide based on the best available information.

Methods to Create a Sales Forecast

Once you've compiled your historical data, you can use two primary approaches to build a forward-looking sales forecast: the "top-down" method and the "bottom-up" method. Each has distinct advantages, outlined below.

Top-Down Sales Forecast Approach

With the top-down sales forecast method, your business first sets an overall revenue goal and then allocates this target proportionally by channel and product based on historical performance:

• Define your total annual revenue target.

• Calculate historical revenue percentages by channel. For example, if last year’s Tasting Room accounted for 30% of total sales, allocate 30% of next year’s revenue target to that channel.

• Within each channel, determine each product's historical sales percentage. If premium Pinot Noir historically contributed 20% of Tasting Room sales and you're forecasting $100,000 in this channel, you'd project $20,000 in Pinot Noir sales for the Tasting Room channel.

• Repeat this calculation across all products and channels.

Top-down forecasting helps you set realistic revenue goals across channels and products aligned with business growth targets.

Bottom-Up Sales Forecast Approach

The bottom-up sales forecast method evaluates specific revenue opportunities at the product and channel level, building up to a total forecast. To create a bottom-up forecast:

• Evaluate each sales channel individually, factoring in planned promotions, new product launches, market shifts, and customer insights.

• For example, if your winery is planning a significant tasting room event in July, project increased sales for featured wines during that period.

• Aggregate these detailed monthly projections to create channel-specific annual sales forecasts, then combine all channels for your total sales forecast.

Bottom-up forecasting allows you to incorporate detailed, operational-level insights, such as the steady growth of a newly launched membership club, into your forecast.

Combining Both Sales Forecast Methods

For optimal accuracy and clarity, combine the top-down and bottom-up methods:

• Use a top-down sales forecast to establish broad, achievable revenue targets based on historical channel and product performance.

• Refine these broad targets using a bottom-up sales forecast, incorporating detailed channel-specific insights, market conditions, and operational considerations.

This combined approach yields realistic, data-driven revenue goals and provides detailed clarity necessary for informed decision-making and strategic financial planning.

Next Steps: Beyond the Sales Forecast

A clear, accurate sales forecast is vital not only for short-term planning but also for the long-term financial health and strategic growth of your CPG business. Regularly revisiting and refining your sales forecast will improve accuracy over time, giving you deeper insights and stronger profitability.

Once your sales forecast is finalized, the next critical step is forecasting operating expenses, which we'll explore in a future guide. Together, these forecasts form the foundation of a robust profit and loss (P&L) forecast, enabling confident progress toward profitable growth.

Need some help or guidance getting your sales forecast in order? Set up a demo.