Just like predicting the weather, sales forecasting methods are a balance of science, history, and a dash of luck.
When businesses do it right, the rewards are fantastic. According to one study, formal and structured forecasting methods correlated with a 12 percent increase in win rates. And another showed that accurate forecasts lead to a bigger chance of year-over-year revenue growth.
The problem? It’s hard to do. And scary.
Just like predicting the weather (again), there are tons of factors that are incredibly difficult to predict. And some techniques require a lot of math.
Thankfully, modern sales forecasting can help. Whether it is quantitative or qualitative forecasting, with a combination of the right software and the right frame of mind, more accurate predictions are possible. You just have to know what to look for.
Consider the following best practices when it comes to assessing your entire sales forecasting methodology.
#1. Don’t Set It And Forget It
Sales forecasting is just as much about the journey as it is the destination.
Sure, it’s crucial to estimate how much you’re going to earn or how many deals you’re going to close, but good sales forecasting gives you benchmarks that help you check in on bigger goals and course correct with precision.
This is why your sales forecasting software must include dynamic and instantly updatable visualizations. Although your sales process should be firm, avoid using fixed odds and be sure there’s a way to check on your calculations as they update with every entry.
Also, consider the specific fields you need to analyze in order to make accurate projections. Modern sales forecasting software should give you the power to completely customize as many kinds of fields that are meaningful to you, in both database and in spatially displayed ways.
#2. Involve Your Reps
If you’re leaving sales forecasting to solely to management, chances are you’re not getting the full picture. In order to accurately formulate your sales strategy, you have to deeply understand your front lines.
Inviting your sales reps into the forecasting process helps everyone understand not just what should be prioritized, but why. For instance, is everyone aligned on why each opportunity stage of your pipeline is defined the way that it is? If there’s a disconnect, it will deeply impact the accuracy of your predictions.
The better each individual sales rep manages their personal sales funnel, the better they can contribute leader suggestions to win larger deals or navigate tough times. Sales is an industry rife with high turnover, which can also play a big part in your sales forecasting. Investing in their professional development can help build an internal pipeline of senior candidates.
Building trust with your team is also vital when it comes to disappointing results. If sales teams feel terrified of “bad numbers,” it may lead to records that aren’t completely honest. It’s worth it to consider automated ways of record keeping as well, so as not to rely completely on manual entries that can be easily inflated or just prone to human error. Speaking of…
#3. Embrace Automation
Many sales reps are already spending so much time on closing deals that data entry falls to the bottom of their “To Do” lists. And that means a lot of crucial information gets quickly forgotten or inaccurately recorded.
Automation functionalities in CRMs can fix this. Through activity or geolocated triggers, many tasks can be automatically entered into your database without manual input. For example, sales enablement software to instantly log field visits instead of requiring reps to update their records by hand.
When things are automated, you can also feel confident that not only the right information is entered, but it’s accurate. This ultra-verification of your data will lead to more accurate sales forecasting.
Another way to think about automation is by analyzing the kinds of calculations your CRM does for you. As said at the beginning of this article, a lot of quantitative sales forecasting methods require a lot of math and spreadsheet work. But they shouldn’t if you’re using the right software.
#4. Use AI
Two heads are always better than one, especially if one of those heads has modern artificial intelligence.
Sure, methods like the weighted pipeline methodology might be popular (as in, the one where you apply the percentage of likelihood from each sales funnel stage to the revenue value) but it is far from elegant. Painting an accurate picture of the market requires a lot of variables and complex calculations, which is a task fit for AI.
Take lead driven forecasting, for example. AI can take all of the historical data your team may have gathered and apply it to demographic, seasonal, spatial, or a host of other factors that may influence their close rate. The more data that can be collected and analyzed about your prospective customers, the closer you can get to incorporate the kinds of insights and personalization that close modern deals.
Another way AI can help is with multivariable analysis forecasting. Say you’d like to combine both top-down and bottom-up forecasting (as a fusion of both is becoming more recommended) with a rep’s individual win rate per the stage of the deal. Mocking up a spreadsheet formula is impossible, but CRMs that use algorithms can make this level of deep analysis possible.
Get Modern When Making Sales Forecasting Methods
Simply put, modernizing your sales forecasting is all about embracing technology and encouraging a more connected team culture. Although it may take some work to refresh your methodologies, the benefits will come.
As you gather better data over time, your sales forecasts will become more accurate and help you precisely anticipate your financial health. It can also equip you with the knowledge you need when considering taking out a new loan or investing in a new business strategy.
Keep these modern best practices in mind next time you make a forecast and see what the power of the future can do for your bottom line.