Essential Tips for Accurate Sales Forecasting
Managing a business is a little like leading the ship. As the captain, you have to keep the eyes on the horizon planning your next move. If there is a storm, you must secure the ship’s loading and warn your deck mates to grab the cover below. In the case of the rocky waters ahead, you have to ask your team to stand sentinel helping you navigate the boat safely. When the next journey is going to be long, it is better to stock up on the food and supplies before the trip.
In business, there are not many chances of losing a worker to scurvy, but it's equally important to plan ahead. So, the best way to forecast the future of the service or product is to analyze the information and trends from the past studiously.
Why is Sales Forecasting Vital?
Sales forecasting is essential in every aspect of different businesses as well as a crucial part of the company financial planning. So, it's a self-assessment mechanism that uses recent and existing sales statistics to accurately predict the future performance.
Being able to foresee effectively depends on the decent overview of your organization as well as the way to control the factors that will influence your sales. Here are 6 key steps that, if implemented, will go a long way to improving the accuracy of your analytics:
An established and proven sales process.
The sales cycle is exact series of steps from lead to close. It is mostly built from investigating the actions taken by the experienced sales reps in your business. You shouldn’t only consider the usual stages, like first pitch or presentation, but also customer’s need for product or service and your available budget. When you perform the complete process, the less guesswork will be done in future analysis.
Defined conversion rates per pipeline step.
If you try to investigate what percentage of sales make it out of each stage, it will help to provide proper forecasting later on.
Determined closing ratios.
It is the most important element of the sales analysis. The average closing rate is based on the past performance of experienced sales reps and should be regularly calculated.
Correct historical data.
As the recommendation, you have to keep the accurate historical information available from the previous performance. Ideally, it can be a part of your CRM database.
It is suggested to set up by what metrics your analysis will be done and agree with all the staff that has to deal with it.
All in all, if you institute these key factors, you can lift your company to ever-greater heights. Hence, it will help you reduce unnecessary spendings, avoid missing potential opportunities and manage your cash flow.
So, let’s dive deeper and go over the main benefits of the accurate sales forecasting:
Better Financial Planning
If you can envisage how much you sell by product or service type and the season of the year, you will be able to count whether have enough money to pay your bills. Also, you will get an opportunity to rely less on credit. In this case, you can meet with sales team each quarter and determine production needs that help you better manage the costs.
More Targeted Marketing
When you can plot your revenue during the year, you will have an opportunity to work with more low-cost marketing options during slow periods. For example, by knowing your annual media schedule, you won’t be scrambling to find a replacement or copywriter for a major project when you don’t have enough cash.
Enhanced Production Managment
Accurate sales and demand forecasting lets you spread out the production to ensure your clients get the service when they need it. So, you will be able to identify your company requirements, including materials, labor and shipping options.
If you perform the accurate forecasts of your business workers needs, you will be able to create a better organization chart, which let you hire the employees proactively. Furthermore, knowing your personnel demand can also help you plan the sales levels. At this point, adding another shift or expanding your production capacity may become profitable.
By and large, with all the tips above you can easily boost your company's overall performance. However, you can find it challenging sourcing and sift the data to pull out this kind of information quickly. So, that’s where technology can kick in and exclude the problem.
CRM for Better Future Predictions
The main hurdle to sales forecasting that of accuracy can be solved with the right CRM solution.Thus, the system should possess the functionality for the salespeople to view their entire pipeline. Each potential deal can be marked or located as regards to the step of the sales cycle it currently resides. But beyond that, more things can be done.
A robust platform allows a total view of a sales rep’s actions and automatically calculates that person’s closing ratio (ratio of actual to failed closes). Furthermore, each potential deal can be rated as to its possible value. And finally, you can quickly determine an average time you need for a complete a deal and the amount of the potential purchases in the pipeline; that will help you derive the accurate analyses.
To sum up, the sales forecasts are usually done with weighty guesswork. However, if you take all the tips above into consideration, your team will not have to cross the fingers and silently pray that business future predictions are somewhere near correct. Hence, if you want to learn more information about accurate and relevant analytics, check out our white paper “CRM Analytics Workshop: Set Up Effective Metrics” for useful insights.