A Beginner's Guide to Sales Forecasting - Sales Growth Advisors LLC

Knowing the weather forecast empowers you to make informed decisions and minimize unpleasant surprises
before you venture out, right? The same can be said for sales forecasting. Unfortunately, too many businesses
don’t understand sales forecasting well enough to use it to their advantage. The following information will help
you implement and optimize sales forecasting in your organization.

Before we get ahead of ourselves, just what is sales forecasting?

The Sales Forecasting Definition is: The process of using available data, tools, and indicators to predict sales activity – particularly closed sales – in a given time period, usually monthly, quarterly, and annually.

Why Does Sales Forecasting Matter?

While some organizations might believe analyzing historical hard data on closed deals is “good enough,” sales forecasting to project and predict future conversions can be incredibly valuable to sales operations. In particular, by using forward-looking leading indicators, you can anticipate problems and take corrective action before those problems become insurmountable. You can also predict market shifts, territory gaps, or other opportunities and move to capitalize on these before your competitors do.

Beyond this, accurate sales forecasting can empower sales organizations to more effectively:

Plan staffing, marketing, and sales activities
Budget for sales and marketing expenditures
Improve sales processes and sales compensation plans to enhance sales performance
Upgrade infrastructure when appropriate
Enhance customer service via better territory alignment and client management

Sales Forecasting Examples

For sales forecasting to be accurate and empowering, it is important to approach the practice using realistic and meaningful data and parameters. This is possible by designing and implementing a powerful and effective CRM system.

For your CRM to enable forecasting, it is critical to understand which metrics will give you a real-world snapshot of current and predictable performance. For example, using accurate CRM data, you’ll be able to better understand sales cycles and reporting periods that are relevant to your industry, your market, and your company.

How can you use sales forecasting to boost sales, revenue, margin, and market share (while also reducing costs, in many cases)? You guessed it…your CRM. With the right data and reporting capabilities, you will be able to optimize sales strategy and sales processes to help you:

Gain a better understanding of your sales pipeline, including being able to recognize and correct sales process-caused bottlenecks
Improve allocation of sales resources to areas of opportunity, including shifting territories or market offerings
Modify your prospect lead scoring to shorten sales cycles and maximize ROI

Sales Forecasting Methods

There are many sales forecasting techniques that be used in tandem (via multivariable forecasting) to help you gain clarity for your current sales performance as well as areas for improvement.

These methods include:

Intuitive sales forecasting, which relies on sales rep experiences and expertise
Historical sales forecasting, using lagging indicators of past performance results
Sales cycle and lead-based “opportunity stage” forecasting

The methodologies and nuances of sales forecasting techniques like these can vary based on the size and complexity of an organization’s customer base, market dynamics, sales processes, pipeline depth, length of sales cycle, and many other factors. It is usually wise to seek the guidance of a sales forecasting expert, such as a Consultant from Sales Growth Advisors, to optimize sales forecasting methods. But regardless of which method(s) you employ, they will
only be as good as the quality and currency of your reporting data.

Sales Forecasting Formula

Is there a single sales forecasting formula you can use to understand and boost sales performance? Frankly, no, although there can be basic equations to help you gain insight into expected performance within each type of sales forecasting; for example, “length of sales cycle forecasting” could be expressed as:

Expected sales revenue = average closing rate x (number of days since the lead entered the sales funnel divided by average sales cycle length in days)

But again, the complexities and nuances of sales forecasting can be vast. If you would like help designing and executing the kind of sales forecasting and process enhancements to maximize results, contact me today.

Setting the right performance metrics is the first step in achieving your sales goals. Our funnel will
help you define these key metrics and put your team on the path to sales success.

If you’d like to discuss the improvement you’re looking for in your sales process, contact me at Chris @ Sales Growth Advisors or book a call through my Scheduling Tool.

I also invite you to follow me on LinkedIn to gain exposure to future article posts that will offer more valuable selling insights.

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I am part of a national group of Senior Sales Leaders who collaborate to share insights like the examples shown in this article. We formed because of our shared passion to help business leaders exponentially grow their revenue.

Chris Tully
President | Sales Growth Advisors LLC