Maybe you’ve noticed a decrease in sales from what you expected in the last quarter? Or realized from social media that your competitors are gaining in popularity with your target customers? That’s worrying because your sales forecasting was essentially meant to predict your expected income.
So, how can you make sure that your future sales goals are accurately documented and reached? The answer lies in using best practices to ensure these scenarios are less likely to happen.
How can your sales forecast affect your business? One mistake in many organizations is to use your aspirational goals for your business as your sales forecast and budgeting. That’s not a good policy.
A successful forecast is one that
- you can actually achieve and
- stretches but doesn’t instantly set your team up for failure.
This is counterintuitive for growth-minded entrepreneurs. So, base your forecasts on reality and not aspirations! Let’s get into how to do it.
Best Practices For Accurate Sales Forecasting
At the most fundamental level, improving sales forecasting means using data to more accurately predict performance and success. But what’s your data like? Here, we offer best-practice ways to improve it and thus tighten your forecast.
1 Unify the Sales Process
Sales forecasting depends greatly on the accuracy of data that’s recorded by the sales people. To improve record keeping and data collection, ensure that sales happen in the same way across the organization. A sales playbook helps this process.
A unified sales process makes it easy for alignment between sales, marketing, and operations. It also helps increase the likelihood of predicting what actions lead to more certain sales outcomes in the future.
Keep it simple and document the sales process, describing every action and step needed to move a deal forward and close a sale. You can then have greater trust in your data for future use.
2 Have a Well-Defined Forecasting Method
Many companies don’t have a sales forecasting methodology that’s proven to be best for them. There are many methods available, but not every forecasting method is created equal.
Best sales forecasting practice means that you have identified what works for you and defined it well enough for the sales team to use it with ease. Some of the popular methodologies include the following, but they’re not intrinsically foolproof, as we shall point out:
Historical Forecasting
This method of sales forecasting uses accurate historical data (benchmarking) to predict how much you’ll sell in the near future based on past results. It sounds simple. You sold three forklift trucks each month last year so you’ll probably sell 36 next year. You don’t have to use advanced sales forecasting tools and technology such as AI to make these predictions! Possibly, you will also factor in likely returning business from current customers, although that’s a little fragile.
The problem is, however, that although this somewhat old-school way of prediction can still have relevance today, and is necessary for comparisons, it has a drawback in 2021-22.
Business is changing rapidly, and the past can’t necessarily now foretell the future with any accuracy. So this method needs using with caution and a willingness to be alert to industry changes in order to adjust in good time before your ROI is damaged.
Forecasting Based on Multiple Variables
This method uses multiple factors to analyze and predict future results. Instead of only looking at a few historical data and factors, multivariable analysis forecasting requires the advanced analytical tools we mentioned – and also analysts capable of finding the meaning in complex data sets.
The problem here might be that its complexity makes it hard for the sales team and their managers to readily understand. They need granular data presented in a visual format with regular updates so they can be more adaptive to circumstances in the market.
Sales Cycle Forecasting
Depending on the length of a sales cycle, the sales team can use sales cycle forecasting to predict when a sale will close. However, it’s difficult to get accurate predictions via this method. That’s because it relies on data from many clients and multiple sales reps. And it must be accurate.
So you need to carefully track the funnel and which opportunities in it have become effectively dormant, and exclude those from future growth calculations. To accomplish this well, you and your team must honestly evaluate your pipeline. If a prospect has stopped returning your phone calls and emails and won’t schedule a next meeting, it’s time to drop them out of the funnel. You can always put them back in if something changes.
The problem here is that, because sales reps are human, it’s likely their feedback will be slightly more glowing than the reality so the data they record may possibly end up “intuitive” at best and inaccurate at worst.
3 Train Your Sales Team’s Forecasting Skills
Forecasting is a skill that’s built upon. It will not always be perfect. And not every sales rep will have the ability to instinctively know how to use and adjust their sales approach according to new data.
On the other hand, you can train your staff about best approaches to sales forecasting. The result will be that when they find themselves failing to meet a percentage target, they’ll know to consult about why it’s happening and what to do to ensure the company’s overall goal is reached.
This growing skill can actually be a motivator for the sales reps – with the resulting increase in data accuracy an indicator to business leaders about the need to hire (or not) new talent, invest in targeted training for the team, or boost marketing spend.
4 Encourage collaboration
Accurate sales forecasting is no longer a one-person job – however smart your one person is. To be successful means forging an alignment between sales and the rest of your organization as necessary. The complexity of the new marketplace requires a complex network of brains and a more flat structure in the company. Both are needed to ensure best-practice sales forecasting.
Therefore, encourage your sales team (department) to collaborate with others constructively and receive contributions from other team members. Collaboration and improvement in sales forecasting requires that
- there are clear, realistic goals, sales quotas, and recording methods set for every individual to keep sales forecasts on track and accurate.
- you communicate current sales metrics understandably, so every team member will know the basis for comparison with, and prediction from, any historical data.
- everyone understands your sales pipeline. Ensure that your CRM tracks opportunities by sales process/stage, and that it’s kept current and accurate by the sales team. As we said, hanging on to leads that either don’t fit the buyer persona or are no longer viable will seriously affect the accuracy of your sales forecast.
Is This Time-Consuming?
Yes! To ensure that the accuracy of your forecast remains consistent, relevant, and successful, you have to follow and implement these best practices to adjust sales forecasting at regular intervals all year.
In today’s swift-moving business world, you don’t have the advantage of time. So if you’re not sure where to start and which combination of forecasting practices will be best for your company, 360 Consulting is ready to help. We’ll work with you to fine-tune your sales forecasting strategy so that it works successfully for your business. Schedule a free consultation today!