Sales forecasting provides organizations with insights into expected sales revenue in a given period. Based on the expected revenue, organizations estimate the value of sales that their sales teams must achieve. Reliable sales forecasting must be accurate to aid in target attainment, boost growth, and customer approach strategies.
It helps organizations allocate resources, source products, and manage cash flow. Inaccurate forecasting leads to challenges of productivity due to a lack of products or oversupply. Here are strategies to achieve the best results based on accurate forecasting.
Leverage complete and accurate sales data
Accurate forecasting is based on historical data and performance. The data cannot provide accurate insights if it is not accurate and complete. It must be gathered from multiple sources and analyzed to provide reliable insights. One of the sales forecast software to use is Revenue Grid. It provides sales teams with strategic forecasting based on multiple levels. The tool is composed of features that achieve several goals, such as:
- Data capture automation and organization
- Accurate future sales performance
- Assessing risks
- Generating sales signals
- Sales coaching
Forecast based on the length of the sales cycle
In the process of winning customers, salespeople follow a repeatable and tactical process. It starts from the time of creating product awareness and proceeds to the development of interest, desire, and taking purchase action. On average, a sales cycle takes about 60-120 days.
Understanding how long a sales cycle takes is crucial in providing accurate forecasting. If the forecasting is extending up to 1 year, the sales team divides that period with the average sales cycle period. It helps them predict how many leads they will reach and the total conversions they will achieve to calculate possible revenue generation.
Use a reliable sales management system
Companies cannot generate accurate data for analysis if the sales management system they are depending on is not effective. The purpose of a CRM is to make sales processes easier and simpler. It helps sales teams manage leads, open/close deals, manage contacts, and perform diverse administrative tasks.
Effective CRM ensures the team gets a clear view of the sales pipeline. They accurately predict the processes they have to go through from one end to the next. The information is necessary when budgeting for resources, planning actions, and predicting successes. The tool should help the team gain accurate and instant insights at every phase in the sales funnel.
Accurately pinpoint common forecasting mistakes
The common forecasting mistakes every organization makes include the following:
- Lack of flexibility
- Under-forecasting/over forecasting
- Ignoring historical patterns
- Relying on best guesses
- Basing decisions on conflicting/limited data
- Failure to use technologies such as AI, ML, and big data
Such mistakes lead to inaccurate sales forecasting, which leads to missed targets. It overwhelms sales teams and increases costs for boosting revenue.
Use demand forecasting model
Sales teams achieve improved results if they understand what future demand will look like. Many factors affect future demand, such as customer expectations, product prices, and consumer income.
Organizations use historical sales to predict how future demand will be. They look at past seasonal trends and analyze the volume of sales achieved to gain insights into the next seasonal trend. Sales forecasting tools help sales teams use real-time data to understand short-term and long-term demand trends.
Understand internal and external factors that impact sales forecasting
Organizations may accurately predict future sales, but they can be affected by internal and external factors. Internal factors are things within an organization, such as hiring, policy changes, change of location, and employee turnover rate. External factors include changes in competition, legislative factors, and economic growth/inflation.
Organizations need to consider these factors and determine how they impact achieving the best results. It helps organizations create a strategic hiring plan and data security and deal with the impacts of inflation. When forecasting, an organization should involve the sales reps because they understand customer needs better.
Accurate sales forecasting provides organizations with reliable insights into revenue growth. The best forecasting results are achieved through the use of complete and accurate data. Sales tools help with accurate data generation and analysis. Organizations must involve their sales teams when forecasting future growth.