As an entrepreneur, you surely might have set high revenue target for your business. But do you have the necessary resources, or are you aware of the potential risks that you might face on the route to achieve this target? Do you know how many customers can you convert in the next few months? Sales forecasting helps in finding answers to these vital questions. It acts as a navigation tool and directs you in the right direction. Business owners can find out their revenue figures in a certain period if they fine tune sales forecasting by using the right techniques.
For successful sales forecasting, there needs to be clarity over a few questions such as:
- How many deals do you convert each year?
- What is your churn rate?
- What is the average level of sales you make for each customer?
- How long is your sales cycle? (if it is less than six months then you need to evaluate it regularly)
- Are there any specific months when you gain or lose more customers?
Once you have a clear base, it becomes easier to forecast sales. The information gained from sales forecasting can be used to plan and handle the sales process efficiently.
Currently, most of the businesses are creating a sales forecast for evaluating opportunities and taking better business decisions. But unfortunately, most of them struggle with implementing a successful sales forecasting technique. Just 31% of businesses consider their forecasts effort effective. If you aren’t amongst that 31% of businesses, then it’s high time that you change your approach and fine tune sales forecasting. But before we do that, let’s ponder over the sales forecasting mistakes.
Challenges to fine tune sales forecasting
Salespeople put an enormous amount of time into sales forecasting, but still, their forecast fails to reflect reality. The adage ‘work smarter, not harder’ perfectly fits in sales. You need to do a few things right and avoid certain mistakes for making your forecast as accurate as possible.
But what are those mistakes?
1. Wishful thinking
Trusting your gut is age-old advice. But sadly, it might not work in sales. Emotional assessment of the way sales is going on can distort the truth. It is necessary to use facts instead of instincts to forecast your sales. Deals are less likely to close as predicted when sales forecasting is based on gut feelings. Yes, no one can be cent percent accurate in forecasting, but a prediction based on factual data and genuine insights can take you closer to accuracy.
2. Failing to define the stages
Each company follows a certain process for sales. A sales process consists of various stages that move towards purchase. Defining those stages of the sales cycle is crucial to identify the customer behavior that signifies the transition from one stage to another. For better forecasting, you need to understand the sales process and its different stages. Pay close attention to the various stages by managing the sales pipeline efficiently. See which deal stage of the sales cycle has problems and what’s motivating the customers to move forward.
3. Ignoring past sales
Looking at the past is a great way of finding what will happen in the future. But most of the companies fail to incorporate their past sales numbers in their future forecast. Past sales data helps in determining how much time does it take to close a deal. You can take the help of a sales CRM for analyzing and reflecting over your historical data. It reveals specific metrics to anticipate the results.
4. Using obsolete ways to forecast
Are you still using spreadsheets for forecasting your sales? Sadly, old ways often don’t work in the modern business world. It is high time you upgrade to a more intuitive system for forecasting the sales. There are many sales forecasting software that helps you in optimizing your sales forecasting process. Such software aids in developing a better picture of future sales. Sales forecasting software helps in converting sales data into future projections.
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Fine tune sales forecasting for achieving future success
Growing companies need to adjust to changes for moving forward quickly. If you don’t keep pace with the changes, you might land in trouble. Market fluctuation, changing customer behavior, emerging sales trends and changing buying patterns are all factors that can throw your forecast off track. Moreover, as I mentioned above, there might be many challenges in your forecasting. Therefore, you need to refine your sales forecasting regularly to ensure accuracy.
- Ponder over your last month, quarter, or annual sales forecast and see how accurate it was.
- Find out what needs fixing.
- Make changes as per the new trends.
- Sales forecasting relies on the data you use.
- So, ensure the data you use isn’t static.
- Moreover, whenever the data is updated, the sales forecasting should be fine tuned accordingly.
- Set a time-frame to refine your sales forecast.
- Don’t take much time for fine-tuning sales forecast.
- It distracts you from focusing on the deal closure.
- Just change what’s necessary to improve forecasting accuracy.
Besides, ensure you use the right techniques for increasing the success rate of your forecasting.
Essential techniques for better sales forecasting
If you haven’t been forecasting using these techniques then, you should surely consider implementing them while refining your sales forecast.
1. Opportunity stage forecasting
Which opportunities are more likely to close? Through opportunity stage forecasting, you can get an answer to this vital question that can help you in driving your efforts in the right direction.
The entire sales pipeline is scrutinized to see in which stage the deal is. The faster your deals move from one stage to another the likelier they are to close. For instance, the prospect whom you called to set an appointment has 10% possibilities of converting into a customer while those who have gone through the product demo have 60% possibilities of closing.
Some of the tools allow you to set win probability for each deal. So as the deal moved forward in the sales pipeline, the win probability percentage is also updated based on the individual stage value. This helps you in predicting which deal has the possibility of closing.
2. Length of the sales cycle
Have you been observing the prospects that enter your sales pipeline? How long do they usually take to convert into paying customers? Forecasting using the length of a cycle helps you in finding that. It is an effective technique that solely depends on objective data rather than on subjective factors like your assumptions.
If the average sales cycle lasts for four months and you’ve been working on the deal for two months, means there are 50% chance of winning the deal.
- The source of the lead also plays a vital role.
- If it is a normal lead generated by your marketing team, then it might take four months.
- But if it is a referral, then it can even close in a month.
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Segregate these leads by their sources to avoid confusion. For accurate results, it is necessary to keep a track on how the lead enters your pipeline that will decide its fate.
3. Multivariable analysis forecasting
This is a highly data-driven approach that has maximum chances of providing accurate results. It is a conglomeration of various other factors like the length of the sales cycle, opportunity stage forecasting, and individual reps’ performance.
- Forecast based on multivariable analysis is quite complex.
- It uses predictive analytics.
- This technique requires high-end analytical tools.
Here you need to keep a tab on the deal progress and various activities, or it will be difficult to get accurate results. Multivariable analysis requires clean data, or you might not get the perfect results.
4. Activity-based forecast
It is comparatively easy to forecast the sales for the current or next month. But what if you want to find out how much will your team product in a given period? Well, for that activity-based forecast can help.
However, to make this work, you’ll need to find out the historical conversion rate for moving from one stage to another in the sales process. You will have to reflect on all the activities executed by your salespeople.
Like how many calls does it take to book an appointment or how many follow-up emails does it take to qualify an opportunity? The activity metrics act as an indicator of what your future sales will be.
Concluding thoughts – Fine tune sales forecasting ASAP!
Forecasting your company’s sales is crucial to find out what to expect in the coming months. It helps in planning and fixing issues in real-time. You’ll know how to move forward and what needs to be done. Regularly evaluate your past sales data and fine tune sales forecasting for deriving accurate sales projections.
Use the right tools to get the best results. There are various sales forecasting systems available in the market. You either opt for an individual solution or use it within a CRM. Investing in a CRM software is a more logical step as you can find everything about your sales in one place.
Along with sales forecasting, you can leverage the benefits of many other features in a high-end CRM like Salesmate. Using its sales forecasting feature, you can predict future trends and make the necessary amendment in your process. It presents predictive insights to make informed decisions.
You can easily gain access to historical sales data inside this intelligent CRM and use it for your sales forecasting. It provides a clear view of the sales pipeline to track the progress of the deals. Its insightful report helps in tracking your outbound activities for better forecasting. Try Salesmate for free to see how it can help your organization.