Although this is impossible (we’re still watching you, artificial intelligence), many companies use sales forecasting to track their performance over the years.
This helps them make better decisions, bringing them closer to the big bucks.
There’s one major problem, though: forecasting sales is difficult. One study found that 79% of sales companies missed their forecasts.
You can’t always predict the external factors that affect your business, such as changes in the market, new laws, or consumer trends.
There is still hope. When you use the right tools, your sales forecast will be pretty accurate. This article will explore that topic.
What is Sales Forecasting?
Sales forecasting involves using different techniques to predict the business’s revenue and sales volume over a certain period. Most commonly, these periods are by week, month, or quarter.
You’ll discover no way to make a sales projection, but specific methods are more effective. A company that uses analytics software and tracks its performance will have better sales forecasts than one that relies on educated guesses or does the math manually.
Benefits of Sales Forecasting
A sales forecast will do wonders for you and your business. These are just some of the many benefits.
Measure demand for your product. Sales Forecasting can help you make decisions about Marketing and Advertising. This can help you maintain an accurate inventory and reduce the risk of stockouts if you sell physical goods.
Plan your growth. Once you know how to run your business, you can make better strategic decisions. You’ll see which areas, departments, and activities need improvement, are best cut out, or will grow at their peak.
Improve your sales process. Which sales reps perform the best, and which need more training? Can you improve your sales process, such as the time interval between following up with leads? A solid sales forecast will give you a better idea of the areas in your approach and practice that can be improved.
Identify obstacles before they become a problem. Sales forecasting allows you to identify issues in advance, which can positively impact your company. Your new compensation plan may encourage your sales reps to take shortcuts during the sales process, or a competitor’s product could steal your business. You can prevent disasters by identifying and anticipating dips.
Sales Forecasting: Quantitative & Qualitative Methods
Quantitative and qualitative approaches are available for forecasting sales. Quantitative Forecasting relies heavily on complex, cold numbers, such as historical data and reporting.
Quantitative Forecasting, on the other hand, is subjective. It is a more human approach, considering the opinions and experiences of individuals and business leaders.
Pro Tip: To help you remember the difference, the word quantitative is derived from the numerical term “quantity,” which involves counting and other calculations. The word qualitative is derived from “quality,” which refers to individual qualities and characteristics.
Quantitative methods of sales forecasting
Quantitative methods of forecasting sales are more accurate than qualitative ones. This is because conclusions are based more on facts and data than opinions or assumptions.
You’ll need a few tools to perform quantitative sales forecasting:
Analytics data about how your business is performing. This data should at least include information such as how many leads convert into sales, the time it took to complete those conversions, and the details of each stage in the funnel.
Industry benchmark data such as research from government agencies and academic institutions. It’s unnecessary, but it can be helpful if you don’t have your data.
A program or forecasting tool that can do complex calculations. You’ll need to be able to perform some simple calculations manually if you don’t already have this.
Qualitative methods of sales forecasting
Qualitative methods of sales forecasting can include:
Subjective Forecasting is when an expert or a business leader uses their intuition, experience, and knowledge to make predictions.
Focus Groups are panels of customers who give their opinions about the products and services offered by your company.
Sales leaders often make forecasts by assessing how their reps perceive current leads, prospects, and conversations. They can be instrumental but are also subject to bias.
Consider a rep who is happy after a great sales call compared to an agent who is dejected after a bad call. Their mood will likely influence their outlook. The happy broker may give higher sales predictions than a discouraged one.
We recommend avoiding scenarios in which decisions are taken without any numerical data.
If you don’t have the resources or capacity to do qualitative Forecasting, it is still better than doing nothing.
Clear Goals (Based on Realistic Benchmarks)
It will be impossible to achieve if you do not know your goal. Set personal goals and team goals for all sales reps.
This goal should be realistic and based on previous performance. If your team has the highest sales of 50 in a given month, setting a target of 75 is not wise. Instead, work your way up gradually.
A structured sales process
Each rep in your team should follow the same practices and steps to guide a prospect down the sales funnel. It creates a predictable, repeatable process that makes it easier to predict the future.
Make sure that you and your team receive regular, comprehensive training.
Define what an opportunity is, how it becomes prospective when the prospect becomes a formal lead, and finally, when a leader becomes a completed deal.
Update and create documents and databases that contain this information in a way that is easily accessible. This way, the data is always there for anyone who needs it.
Understanding Your Sales Pipeline
What is in your sales pipeline? How many leads, opportunities, and closed sales does each rep have? How long has each agent been at their current stage, and what is the average for your company?
You will be able to predict the future of your pipeline better if you have a better understanding. You can also identify areas that need extra support and training by analyzing the performance of each rep.
We have already mentioned that accurate and comprehensive data are essential for good Forecasting. Performance tracking software, such as a Customer Relationship Management (CRM) platform, is beneficial.
CRMs such as Copper allow your reps to track the most minor details. For example, they can easily keep track of how many conversations each broker has had with a particular contact, the content and length of those conversations, or the time it took to complete the various funnel stages. These granular details will improve your ability to predict.
If you do not have a CRM system, encourage your sales reps to take detailed notes on their daily activities. Make spreadsheets or other documents so that they can quickly enter this data.