Sales forecasting is a critical part of business management. While it is not an exact science, it is essential for setting goals, encouraging persistence in your sales team, creating cash flow projections, making sound hiring decisions, practicing good resource management, and creating strategies for driving overall revenue growth. Here are six tips to help you improve your sales forecasting:
- Review it monthly. Reviewing your sales forecast monthly makes it possible to spot potential problems and take corrective action before you veer too far off course. While your actual sales don’t always match your forecast, you can and should try to make sense of the disparities. The underlying cause of exceeding or falling short of projected revenues could be due to production delays, shifts in the competitive landscape, a cumbersome tech stack that’s slowing down your sales team, or even employee morale. Bring your team together to brainstorm the reasons for both positive and negative variations to gain clarity for future forecasting and course-correct in a timely manner.
- Use a consistent model. Better accuracy in your sales forecasting comes with time, attention, and consistency. If you’ve based your forecasting on historical data, but you’d like to change your forecasting method to consider current pipeline opportunities, you may consider changing your method to pipeline forecasting. It may be worth trying various methods until you find the one that works best for you. Simply keep in mind that changing methods means establishing a new baseline, and it may take time to see new patterns emerge. Also, if you plan to switch to a projections-based approach, a good sales engagement platform that automates the sales workflow and generates pipeline reports is essential.
- Collaborate. Forecasting should not be a “one-person job”, and sales forecasts don’t just pertain to sales and marketing. Personnel shifts and employee onboarding, new marketing strategies, revised purchasing methods, product innovations (or failures), new industry regulations, and changes in the competitive landscape will all have an impact on your projections. Ask open-ended questions and get company-wide input to be sure you’re considering any foreseeable variables. This approach also ensures that every department has some skin in the game when it comes to reaching the goals you’ve set.
- Watch for false alarms. Seasonal highs and lows, economic fluctuations, and shifts in the marketplace can create false alarms in the short-term. Pay attention to short-term shifts, but keep your eye on the big picture. Also consider that your reports may contain erroneous data, flaws in your data analysis, or information based on the wrong sales metrics. So, if your quarterly reports show a large variance from your projections, keep calm and do your due diligence before you alert the team.
- Keep it real. Setting pie-in-the-sky sales goals will only serve to frustrate your sales team. On the flip-side, failing to follow up with reps when forecasted sales goals are missed sends the message that the projections aren’t to be taken seriously. Create individual and team quotas that are both aspirational and attainable, and discuss them openly with your sales team. Then, when those sales goals are either met or missed, circle back around to determine what happened.
- Use the right tools. Sales department-wide consistency in how opportunities, leads, prospects and closed deals are labeled is also essential to forecasting accuracy. Sales engagement platforms can provide you with consistent labeling and insights into what is working and what is not in your sales efforts.
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