Sales forecasting is critical to your company's success. According to an Aberdeen Group study, businesses with reliable sales predictions are 10% more likely to raise their annual revenue and 7.3% more likely to meet their goals. Many businesses, however, continue to struggle to produce reliable revenue predictions until the end of the year.
Sales forecasting is crucial because it allows you to determine how much revenue you would expect to produce over a certain time span. Sales projections provide data that can be used to make informed decisions about the sales process.
Keep in mind that to be reliable, revenue predictions must be based on evidence. When predicting future profits, reviewing your past sales data can be a good place to start because it offers you evidence rather than wishful thinking.
Sales forecasting helps you to identify potential problems so that you can minimize or at the very least lessen their effects. For example, if your sales revenue begins to decrease, you will be able to identify the triggers sooner rather than later, preventing further sales decline. Some changes can be made more quickly, such as improving your promotion tactics or educating your sales reps.
Here are some tips to help you get a handle on your sales forecasting.
1. Use the Right Tools for the Job
Ascertain that the sales and finance departments are using the same platform to handle the sales pipeline and forecasting processes. Any discrepancy here creates data problems and wastes a lot of time debating the numbers' accuracy.
Avoid spreadsheets at all costs and use your CRM as the system of record for pipeline data. The errors and inaccuracies pile up when you're juggling several spreadsheets and the dynamics of a global or matrixed organization. Instead, try a comprehensive solution like Quickbooks Premier.
Furthermore, creating and managing these complex spreadsheets takes time and is therefore prohibitively costly.
Install a pipeline analytics tool that can quickly show you what's changed and give finance and sales teams early insight into deal and pipeline risk.
Ensure that the forecasting platform you're using meets the needs of both sales and finance. Excel allows finance to roll up numbers across multiple dimensions (for example, product, area, and sales organization), but it isn't designed to handle the complexities of matrix, overlay, and channel sales organizations.
Purchasing sales forecasting software may require an initial investment, but it will help sales teams reduce their workload over time. This frees up sales reps to concentrate on generating revenue rather than catching up on reports.
This also alters sales reps' perceptions of sales forecasting as a time-consuming report that should be avoided at all costs.
Spend time training sales reps and management on how to use sales forecasting tools. When companies appoint a new CRM to their sales or finance teams, they often fail to allow them enough time to familiarize themselves with the system. Regular training will help your reps use more features of their sales forecasting software.
2. Keep Accurate CRM Data
To ensure that sales reps have reliable data on offers and prospects, make keeping accurate CRM data an obligatory and part of the job.
You can help do this by creating dashboards that show positive and bad data stewardship by team or representative. Easy flags and warnings can be set up to highlight slacker and bad conduct (e.g., an emailed alert to highlight deals with close dates in the past or deals that have close dates pushed by more than X times in a quarter)
Given the importance of accurate data, some companies have tied KPIs and rewards to data hygiene. Finally, sales executives must be held responsible for their sales team's data quality.
To make an accurate forecast of future revenue, you'll need the right data from your previous results. Your sales managers' ability to report the right numbers of your current sales is critical to obtaining reliable sales estimates.
3. Pay Attention to Your Marketing Strategy
You must first comprehend the company's marketing funnel before making any sales forecasting decisions. This will assist you in determining what motivates your potential client to move from one stage to the next in your funnel.
What is the concept of a marketing funnel? From initial communication to purchase, this reflects the buyer's understanding and consideration of a product or service.
Metrics that should be considered when determining how your customer's path affects sales forecasting include opportunities, how many visitors you get to your website, and what kind of leads you have for marketing and sales.
From these metrics, your team will estimate the number of leads your marketing campaigns would produce. It can also forecast the leads' conversion rate and funnel velocity.
4. Concentrate on Demand
Don't just think about the availability of your product or service while predicting revenue. Concentrate on demand first, then consider supply. This will assist you in providing the required inventory. You'll be able to avoid both shortages and surplus inventory, resulting in even more cost savings.
For example, you typically provide 200 computers each month, but the data indicates that 300 computers will be required next month. As a result, by planning ahead of time, you will have enough time to order more computers to satisfy the demand.
5. Examine External Factors
It should come as no surprise that what your rivals do will have an effect on your earnings. As a result, it's important to understand what they do to boost revenue. As a result, you'll be able to devise more effective methods for recouping your sales money.
When the economy is doing well, consumers are more likely to invest in their companies. When the economy is poor, however, the sales period takes longer, and consumers give more thought to each purchase.
Make sure you're still aware of what your potential customers want. You need to know if your service or product is still in high demand. If demand is poor, consider adding a trending item to your sales, offering a discount on your service or product, or utilizing bundling techniques.
At certain times of the year, the consumers will be more likely to purchase. Adults with children, for example, are more likely to make purchases during the back-to-school season and spend less the rest of the year.
New laws and mandates can increase or decrease your company's profitability, depending on whether they create demand for your product or make customers hesitant to buy something new.
6. Examine External Factors
There will be some changes required when you switch your company from one place to another. Your salespeople will need time to get to know the new territory and develop their pipeline, so expect a temporary drop in revenue.
Changes in sales regulations or policies can have an effect on your earnings. If you enact a four-month clawback on commission, for example, your income would almost certainly fall. And the salespeople can only sell to those who are the most likely to buy. However, as the number of opportunities grows, the income will rise within a quarter.
As a result of layoffs, the number of sales reps on your team can decrease, lowering sales revenue. You should expect revenue growth in the following timeframe if the number of your sales reps increases.
By taking a few planning measures, you can predict your company's revenue and maximize your profits.