Sales Forecasting Best Practices
Every company needs sales revenue to keep the lights on and the doors open. While no one has a crystal ball, it’s important to engage in accurate sales forecasting to give you an idea of what type of revenue to expect in the upcoming months.
With the standard sales forecast, you would look at what you achieved in the previous months. You might also look at strong months vs. weak months to help identify any weaknesses or reasons for a downturn.
Then, when you have accurate sales forecasting you can make better decisions around purchasing and expansion. It’s always important to know if you will have enough funding on hand to support your company. As a result, you need to know how many sales will be closed within a specific time period.
It also helps with inventory levels as having too much or too little inventory can hurt any business. If there are potential changes in the economy, accurate sales forecasting can also help to ensure better plans are made. In terms of staying on track with quota objectives, sales reps need to employ accurate forecasting so that they know which areas need work.
Accurate sales forecasting can help to reduce risk while improving revenue opportunities. When sales reps know where they stand, the company can then know where they are in terms of reaching their financial targets. Marketers also benefit from sales forecasting because they can see the ROI of their marketing campaigns and use this data to design more effective campaigns and targeted/personalized messages.
Plus, sales forecasting can help reduce risk around discounting since companies can use this information for upcoming markdowns without hurting their margins and bottom line. Not to mention, sales forecasting can help to show where fluctuations have occurred so that companies can do a better job of getting ahead of any dips in demand.
Furthermore, with historical data gleaned from your CRM system, you can identify when customer demand drops off and when customer demand spikes. Then, you can tailor your sales activities to better address the dips and spikes.
Create a funnel blueprint
You need a written process to ensure everyone is on the same page with the necessary stages of the sales funnel. Sales reps and marketers can differ in their tactics in terms of guiding a customer throughout the stages of making a purchase.
Yet, the company needs a standard process that is agreed upon by all parties. This is critical to ensure you can accurately forecast your sales funnel results against a standard process. Otherwise, you will have varying results based on varying processes.
Make sure forecasts are visible for the intended recipients
The sales process can be fluid. Still, reps need to know where they stand in terms of sales performance–at all times. If they’re not on track to reach their sales targets, then a visible forecast will let them know so that they can make modifications to their strategies.
Understand the numbers
It’s important to live and breathe sales forecasting and funnel management. This is the key to sales revenue success. Here are a few metrics that are vital to know:
- Average deal size
- Win rate
- Number of open opportunities
- Leads created per month by each source
- Conversion rate of leads to opportunities
- Conversion rate of opportunities into closed deals
- Length of the average sales cycle
Now, with those metrics, it’s crucial to have the right data. This means that sales reps should be entering accurate and timely data into the CRM system, consistently. Sales forecasts should be data-driven with analytics provided by your sales CRM, right down to the deal level.
It’s important to have the ability to plot trends over a period of time. When you continuously analyze your sales forecast and funnel, you can also consistently improve accuracy. And, the analytics can be used to coach sales reps who are struggling to meet their numbers.
There is nothing worse than being surprised by a forecast when the quarter is over. Plus, sales managers need the ability to track the big picture. They have to manage teams of sales reps, and, need to know how well their department is doing against their sales quotas. It’s difficult to perform at your best, or make the necessary adjustments if you don’t know how you’re doing.
Review the pipeline
One of the best ways to ensure data accuracy to deploy consistent pipeline reviews. With pipeline reviews, you can take a look at the lead score and quality of recently-added opportunities within the sales funnel.
Since you will be reviewing newer opportunities, managers can have greater input before the sales funnel process. Furthermore, you get a reminder of the overall health of the pipeline. Having high-quality leads means a healthier pipeline and better sales results.
Sales forecasting is a crucial practice to ensure everyone is making progress towards their sales objectives and to give a better idea of which areas need work. This also ties into sales funneling and ensuring a healthy pipeline, which contributes to better forecasting and revenues.
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