How to Eliminate Guess Work in Sales Forecasting
Sales forecasting is one of the most important elements of a business. Sales forecasting will allow you to look ahead and make plans for the future based on anticipated income, but it is essential that you get your predictions right. If you overestimate a sales forecast, you may spend beyond your means and leave yourself with cash-flow problems. If you underestimate your sales, you may understaff the business or suffer from stifled growth.
To generate the best results from your sales forecasting you need to establish a proper sales process and use tangible evidence.
Key Forecasting Metrics
- Percentage of historical conversions
- Duration of the contract process
- Delivery time
- The cycle of the customer renewal process
- The number of sales of each product or service previously
Applying guesswork to your sales forecasting will only leave you at risk, so here we explore how to carry out a proper and realistic sales forecast:
Review Your Sales Process
The first important step in achieving an accurate sales forecast is to review your existing sales process. By learning the journey that the customer takes and analyzing the conversion rate from lead generation to sales, you will be able to create a more refined picture of potential sales for your forecast. Guessing at the potential rate of conversion for your leads will only lead to errors, so you need to look at the actual and realistic conversion rate. With this information, you will then be able to make a more realistic judgment.
Factors in Prospecting Changes
Your sales forecast also needs to be realistic about changes to prospecting, because this will affect your lead generation and ultimately your sales. If a prospector goes on maternity leave, for example, you will lose the capacity to generate leads with this individual. You should also take into account other disruptions to business that will reduce output and can affect the sales forecast. For a sales forecast to be effective it needs to be reactive to changes in the business and needs to be realistic when changes will affect sales.
Use the data
The most important element in sales forecasting is in using the data that is available to you. By assessing the systems that you have in place and considering how various factors are affecting sales, you will be able to generate a far better sales forecast. Don’t leave your forecasting down to guesswork – instead, use the data to get your predictions correct.