Ever thought of planning a long transoceanic voyage? It’s not a simple boat ride down a gentle stream! Effective sales forecasting and planning is more like your intended adventure across a vast unpredictable sea!
Effective sales forecasting is important so you can
- align your sales quotas and revenue expectation,
- know ahead of time whether you’ll make enough sales to cover your business costs,
- identify high-performing sales pipelines and allocate resources well, and
- identify gaps in your sales performance.
Moreover, effective forecasting promotes confidence in your board, your team, and your customers. It’s the basis of your financial voyage for the year ahead.
Yet, it’s worth noting that in recent years, around 71% of sales forecasts have been inaccurate. Without ignoring the effects of inflation, that means forecasting and planning was also ineffective.
This has negative consequences on your business.
Firstly, whether you offer a service or a product, your ability to accurately forecast can have a chilling effect on employees, external stake holders, and your customers.
Secondly, inaccurate sales forecasting and planning (whether under- or overestimating) will hinder your ability to make accurate decisions about your business. For example, scaling up or down your cloud infrastructure or reassessing your tier 1 suppliers.
But what causes seasickness on your planned journey?
Causes of Inaccurate Sales Forecasting and Planning
Aspirational goals are important and setting them as a stretch objective is something we encourage. However, setting aspirational goals as the actual forecast is often a recipe for negative outcomes.
When setting goals, you need process and information to make solid predictions. Don’t get caught in the trap of making your team fail by setting aspirations as the sole target. Have the proven, data-driven goals as your target. If you reach the aspirational goals, let’s celebrate even more!
Ocean-going sailors set out with a plan. They study the currents, weather patterns, and known obstacles. They leverage advanced tools, like GPS and weather radar, but also trust their experience and intuition.
You need sales data analysis and market research – the hard numbers that guide your decisions, but also the softer, qualitative insights that you gather from customer interactions and market observations.
However, if your data are poor, accurate sales planning and forecasting is out of reach.
Lack of a Standardized Sales Process
Our sailor can’t, of course, predict every wave and gust of wind on the journey. It would be impossible, right?
The same goes for sales forecasting. It’s not about predicting every little change in the market but about setting a general course and being prepared to make adjustments as you go.
When your sales process is unstandardized, your sales reps might adopt different sales methods. This inconsistency skews your sales forecasts due to terminology gaps and discrepancies in the information collected.
If you lack a sales playbook with standardized processes to guide you, you’re in for some seasickness!
Lack of collaboration among your sales reps
Just as the captain adjusts the sails to capture the wind efficiently and keep the crew’s focus on course, you organize your reps as a team to keep on course with data and adjustments.
So – lack of collaboration among your sales reps increases the likelihood of generating inconsistent or useless data, which skews effective sales planning and forecasting.
Outdated forecasting tools
Electronic navigation aids our sailor! In the same way, the forecasting tool you use matters. Spreadsheets can no longer handle the high volume of data collected from several consumer, vendor, and supply chain touch points.
It’s critically important to have the right systems to support your business, including the right methods of pulling data together from multiple disparate systems. ERP, CRM, BI Tools… Make the proper investments in your technology stack!
If your salespeople fear termination, they can hold back on reporting bad deals and inflate their success rate. Withholding the data lowers your overall forecasting accuracy.
Your sales leaders are also humans and susceptible to certain biases which may influence their judgment in how they use the available data instead of relying on AI and predictive analytics.
How to Make Your Sales Forecasting and Planning Effective
1 Standardize your Sales Process
You have to ensure that the sales process is consistent across your organization.
This involves having a unified sales funnel and a clear approach to how you conduct sales and what data you record. While it’s okay to train your salespeople on the sales process, it’s essential to have the entire process documented in a playbook to refer to.
Keep the document simple to understand. But a standardized process increases your chances of improving data quality – effective sales planning depends on data accuracy.
2 Monitor your Sales Pipeline
Keep an eye on your sales pipeline and constantly do a pipeline analysis. This provides you with relevant metrics about your sales performance.
There are a several forecasting methods, but when planning and forecasting, take note of lagging and leading indicators.
The leading indicator is the key ingredient in sales forecast accuracy. While a leading indicator looks forward to what might happen, a lagging indicator looks back at whether the intended result was achieved. They work best if taken into account together.
3 Foster Collaboration
Sales forecasting is beyond what any single person or team can handle. Although you have maybe one analyst in-house, further effective planning and forecasting comes after the data analysis part. It requires the sharing of ideas and everyone’s contribution to make it successful on the ground.
It’s worth noting that a flatter company structure encourages teamwork buy-in more than a hierarchical structure. And – in a virtuous circle – buy-in plays its part in carrying out your sales plan based on your forecasting.
4 Detect Anyone Trying to Game the System
As we mentioned earlier, you cannot ignore the role of human behaviour in sales forecasting. Sometimes, your sales team as a whole can intentionally provide conservative forecasts that they can easily surpass!
Sandbagging like this undermines your effective sales planning and deprives you of the growth you might have achieved through more ambitious sales targets.
To prevent this, you can track the forecasting performance of each individual against the entire group. This is also why you cannot use spreadsheets! You need a more advanced tool, but it will make your forecasting, planning, and decision-making smarter.
5 Sales Leadership
As the leader, you’re responsible for driving compliance and accountability. This requires you to consistently communicate the importance of having accurate sales forecasting, and how data is used by your team.
Our sailor’s long-term, unchanging guideposts are the stars. Your stars are your company’s vision, mission, and values. No matter how rough the sea gets, the sailor stays true to these constants, just like you, as sales leader, have to stay true to your business’s core principles and ensure the best effectiveness of your sales forecasting and planning.
Need Help to Implement Effective Sales Planning?
In the end, reaching your transoceanic destination – your sales goal – is the result of good planning, sound decisions, resilience, and a bit of sailor’s luck.
However, at 360 Consulting, instead of relying on luck, we recommend having systems and strategies that work!
We can put you on a fast track to effective sales forecasting and planning, and help you identify the gaps in your processes that hinder your sales growth. If you’d like help to fine-tune your sales engine, schedule a consultation. Let’s talk!.