With the global economy increasingly unpredictable, manty business leaders would absolutely love to have 100 percent predictable and foreseeable revenue streams. Without the ability reliably forecast revenue, everyone from small business owners to the chief sales officer for a major multinational corporation will obviously have difficulties creating annual budgets for the company and outlining strategic growth-oriented goals for the company.
Aberdeen research recently determined that 97 percent of companies that implemented the best practices in sales forecasting processes were able to successfully achieve quotas. Only 55 percent of companies that did not implement the best sales forecasting practices were similarly able to achieve their expected quotas.
In this short article, we will take an in-depth look at how companies can build the most accurate sales forecast. We will explain the different types and methods of sales forecasting as well as looking at some of the best new and innovative tools and solutions that can help to ensure the best sales forecasting for your company.
Lastly, we will also explain how the solutions offered by Scaling Sales can help CEO´s, sales managers, and others in your company devise the most precise and detailed sales forecasts to help your company grow.
Here at Scalingsales.com, our research and experience confirms that by treating the salesperson as their own CEO, companies are setting the foundation for a genuine accountability system that rewards salespeople for the quantity and quality of the sales and for the true value they create for the business. Creating a solid relationship of trust and accountability with your sales team is one of the cornerstones of effecting reliable sales forecasting for your business.
Understanding Salesforce Forecasting
Definition and importance
One recent study carried about by a leading revenue operations platform found that 93 percent of sales leaders are simply incapable of accurately forecasting revenue within 5 percent, even with two weeks left in the quarter. As we mentioned in the introduction, sales forecasting is an essential aspect of any successful business looking to attain its sales and revenue goals.
Sales forecasting refers to the process of assessing and predicting future revenue through appraisals that consider how much of a product or service offered by your company will sell in the next week, month, quarter, or year. As a basic definition, a sales forecast is a carefully projected measure that considers how a certain market will respond to your business efforts to penetrate that market.
The impact of forecasting on revenue growth
Sales forecasting is extremely important for businesses in that it plays an essential role in forecasting revenue growth. If your business is consistently missing or undershooting your sales forecasts, this could lead to a negative impact on your long-term valuation.
Similarly, by having accurate sales forecasts, your company will have the most essential data to help allocate resources, create future business plans, outline strategic growth opportunities, budget correctly, and create risk mitigation policies. Furthermore, accurate sales forecasting can also help a business recognize early threats or indications that your sales pipeline is faltering. This can allow for course correction early in the perceived risk scenario.
It is also important to note that when a business regularly exceeds its sales forecasts, this can also lead to problems maximizing your revenue growth. If your business is unable to accurately estimate your future revenue streams, you will be missing opportunities to bring one new employee talent to keep your business growing. Precise sales forecasting thus keeps your company primed to make the most of the opportunities that are available for capitalizing on revenue growth scenarios.
Types of Forecasts for Businesses
Research from the Aberdeen group finds that companies that are able to accomplish accurate sales forecasts are 10 percent more likely to grow their revenue year-over-year and 7 percent more likely to hit quota. Of course, companies need to understand that there are different typers of sales forecasts that are relevant to different areas and types of businesses. A general annual sales forecast for your company might be helpful for a senior level sales manager looking to devise company-wide growth strategies, but it might be less helpful for a team leader working in one branch of the company that specializes on selling only in one geographical market.
Below, we outline a few diverse types of sales forecasts.
Product family forecasts: Many companies sell distinct types of products and services as part of their overall portfolio. Sales teams need to be able to forecast product family revenue by sales territory in order to maximize revenue growth opportunities. A product/service family forecast allows a sales team to have a detailed and specific sales forecast that relates directly to their market, product, etc. For example, a product family forecast can let your company see how well a certain product is selling on the east coast as compared to the west coast. These territory-specific forecasts can help motivate your region-specific sales teams as well as devise market-specific strategies for growing your overall revenue.
Overlay split forecasts: Revenue splits are helpful tools for sales managers who need to recognize specific contributions from your sales team members who have direct responsibility and involvement in sales growth opportunities. Overlay splits allow these managers to assign credit accurately for the opportunities provided by different members of your salesforce by allocating credit to overlay sales roles for working on opportunities. An overlay split forecast is designed so that the specific forecast amounts are distributed through your sales team hierarchy, based factors such as the amount field and the overlay team member’s split percentage.
Opportunity revenue split forecasts: Similarly, an opportunity revenue split forecast4 can be used to drastically improve the insight and discernability related to the performance and sales indicators of the individual members of your sales team and to individual product forecasts.
Territory forecasts: Lastly, with territory sales forecasts you can allow your sales team to visualize how sales and revenue are expected to differ between territories. This forecasting method can create healthy competition amongst your sales team. Furthermore, this forecasting can help senior level managers in the company determine the best compensation packages for your team. Many sales managers struggle with the decision to prioritize a more stable base salary or a higher commission rate for your sales employees, and accurate sales forecasting can help with this task.
Strategies to Improve Sales Forecasting Accuracy
Of course, having inaccurate or imprecise sales forecasting can cause more harm than having no sales forecasts for your company. According to recent research, 59 percent of sales forecasts may actually be wrong. Without accurate sales forecasts, your company will have a challenging time budgeting correctly and designing revenue growth strategies that work.
In order to improve the accuracy of your sales forecasting, leveraging data analytics is one of the best tools you can use. Sales predictive analytics can give your business an enormous variety of data that can help you determine customer behavior patterns, market dynamics, and how your sales process is operating.
Data analytics will also help you to make sound, informed decisions and develop effective sales strategies. Also, data analytics can help companies improve their operational efficiency and to determine which sales strategies are yielding the most success and hard results.
Furthermore, creating collaboration amongst different members of your sales team is another important strategy for improving your sales forecasting accuracy. According to recent sales forecasting research from Xactly, collaboration amongst team members stands as a cornerstone of sales forecasting success. The research determined that 97 percent of business leaders surveyed believe that Sales and Finance teams need to work better together in order to hit their forecasting targets.
The “four sales meetings” approach outlined by Scalingsales.com outlines the best way to ensure that every member of your sales team understand their specific roles and how they can work together to meet their sales forecasts.
Leveraging Third-party Tools for Enhanced Forecasting
As digital technologies become increasingly more powerful and play ever-larger roles in the sales process, companies need to understand how to use third party tools for enhancing their sales forecasting measures. Artificial intelligence systems and large language models (LLMs) are being used more frequently by businesses who are looking for diverse ways to harness the power of AI for predictive forecasting.
AI for sales forecasting has the ability to function as a “connector” between your company´s sales predictions and estimates, and real-time market conditions that specifically affect your region, market, or industry. Whereas companies in the past used to update their sales forecasts yearly (or quarterly, in the best of scenarios), AI tools for predictive sales forecasting can give you real-time information on how the market is shifting on a daily basis.
This consistent flow of real-time information and data can allow data-driven companies to update and tweak their sales forecasts in order to reliably respond to the shifting market changes. The best AI systems for sales forecasting have the ability to automatically consider the different market changes. The system will then recalibrate the sales estimations and predictions to leave you with an up-to-date sales forecast that is more realistic.
Besides AI systems, businesses today can also integrate their sales forecasts with different analytics platforms. The best analytic tools that can be fully integrated with sales forecasting should include features such as full data integration (into an existing CRM system, for example), a user-friendly interface, pipeline creation forecasting, real time analytics, and the ability to scale as your business grows and achieves to revenue targets.
Boost Your Sales Forecast Accuracy with Expert Guidance
Current industry data finds that 80 percent of sales organizations do not have a sales forecast accuracy of greater than 75 percent. That means that the vast majority of businesses are simply unable to reliably calculate their revenue streams. This obviously has repercussions in budgeting, strategic planning, and growth policies. Fortunately, there are ways to increase the accuracy and reliability of your sales forecasts.
Here at Scalingsales.com, we help you identify the root causes of your sales issues, clarify where you want to be, and create a plan to bridge the gap between the two. We are also able to help companies identify where their current forecasting methods fall short, and how they can improve their overall sales forecasting measures.
We are one of the few coaching and consulting programs that offers free consultations where we can help you gather a clear and concise picture of your sales-related issues, a plan to solve them, and in many cases, we can even start working on an immediate sales problem you're experiencing such as identifying the mistakes in your sales forecasting methodology and designing innovative approaches to improving your sales forecasting accuracy.
Our innovative and effective coaching and consulting program is designed to put the CEO and their team firmly in control of converting prospects into new customers and onboarding and leading their salespeople. Together, we can come up with innovative solutions to create a compensation plan that incentivizes and rewards results for your company, your clients, and your salespeople.
If you´re ready to get to the root of your sales issues, schedule a call today with Steve by following this link. You can also use this step-by-step checklist as your first step to attracting more customers, wining more deals and getting control of your revenue.
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