Sales forecasts are essential to nearly every aspect of a company’s functionality, from marketing to finance and everything in between. An accurate sales forecast will provide the information needed to estimate budgets, predict inventory and supply chain operational cycles, determine if you should be recruiting or training for increased opportunities on the horizon, and more. Knowing your outlook early enough to take action can save your company from facing the feast and famine cycle quarter after quarter.
Unfortunately, a study conducted by Upland Software revealed that while most salespeople spend 2.5 hours every week forecasting sales, these forecasts were usually less than 75% accurate. Seeing as such discrepancies can easily result in the mismanagement of resources for a quarter (or even an entire year), bad forecasts quickly snowball into big problems for the longevity of a company.
So what are some of the biggest factors and mistakes to be aware of when creating your sales forecast? How can you make an accurate sales forecast to begin with? We did some digging and complied 5 of the biggest habits to develop that can affect your predictions. Keep these in mind when it’s time for reassess your team’s progress.
1. Always Refer to Historical Data
We get it—historical data might not be available to everyone, particularly startups and younger companies. However, there is still nothing to stop you from using the top-down forecasting method in order to gauge how much market share your budding company can be expected to capture. What’s more, you can also take a peek at how other competitors in your field have performed to get a better idea of what to expect. Generally, any indicator of sales forecasting is better than none at all.
For larger companies, historical data is invaluable. It allows you to review last year’s sales and deduce a forecast for the month or quarter, meaning actual data is driving your resource allocation and budgeting rather than gut feelings. As we’ll see, data is almost always the best tool when creating an accurate sales forecast.
2. Keep Your Forecasts Updated
As sales conditions change throughout the year, your forecasts can easily slip into the valley of inaccuracy if their data isn’t staying up-to-date. The business world fluctuates rapidly—sometimes it can only be a matter of days before your budgeting isn’t able to handle a sudden increase of sales! The numbers are never stagnant, often influenced by world events and community trends alike. The 2020 coronavirus pandemic is a prime example of massive economic upheaval occurring in the span of a couple of months!
Always make it a point to check your data every week or so to ensure your predictions are on track and align with your quotas. Keep an eye on the news, research expert insights, and take notes from predictive analyses in your market to keep the data fresh and, by extension, your forecasts accurate.
3. Keep Tabs on Your Sales Team
Who better to offer feedback and insight of your sales than your salespeople and distribution channels? After all, they are the ones on the ground delivering presentations and closing deals in the first place; they know what works and what doesn’t. Take a moment to sit down with them and learn about your customer’s buying behaviors before factoring that data into your forecasts.
Furthermore, your reps each have their own track record when it comes to making sales. After taking into account various factors surrounding the sales process—such as how long an opportunity has lasted, when first contact with a buyer was made, and the success rate of the salesperson—understanding how likely each sale might go through results in incredibly valuable data for a better forecast. Pay attention to the feedback of your team before finalizing your estimates.
4. Use a Good CRM
CRM (Customer Relationship Management) systems have made tracking progress across your team more efficient than ever before. By utilizing a good quality CRM, your sales team can view a record of every interaction made with prospects and amongst each other. Even better? A strong record of sales interactions keeps your data as empirical and updated as possible.
Without a CRM, the process of recording sales progress becomes tedious and error-prone, requiring manual data entry from your busy team. Not only will your data have a higher chance of being inaccurate without one, but the likelihood of your sales team remembering to document every step of their deal-making journeys isn’t always high. An automated program (such as Hubspot CRM) can take away the headaches and give your team a place to review their own results.
5. Stick to Raw Data, Not Good Feelings
It can be easy to stumble into the pitfalls of over-optimism when your company just broke a new record or is rolling out a new product. Sadly, the business world does not take kindly to guesswork. Sculpting a forecast based off of feelings can be a recipe for disaster in the long run, and is likely the reason why so many forecasts fall short.
Numbers are your friend. Remember that the more number points you can integrate into your forecast, the better you can depend on it to steer the rest of the company’s time and resources all the way to the quota. Although opinions and feedback have their place in the forecasting process and are always a good idea to gather, predictions will never beat quantifiable data. When developing a forecast, focus on numbers first, everything else second. To avoid forecasts which tend to be too generous, consider using the Length of Sales Cycle forecasting method.
Developing an accurate sales forecast can be the key to a profitable business. Nevertheless, many companies stumble because their lack of attentiveness shows through their estimates and data. Stay agile with the marketspace, remain dedicated to using good data, and collect feedback to refine your predictions. With enough diligence and teamwork, a reliable sales forecast shouldn’t be too difficult to put together to keep your progress tracked and your quotas in sight.