Sales forecasting is an important activity for any business. Without accurate sales forecasts, it is difficult for a business to predict its future revenue or growth. Here are three properties that every sales forecast must have to make it valuable for a business.
1. Accurate
A sales forecast that doesn't match the actual results is useless. In fact, an inaccurate sales forecast could be worse than useless, as it may lead a business to expand more quickly than it can afford, which could lead to great financial loss and ultimately cause the business to fail.
Using data can help you create an accurate sales forecast. Take a look at past data from your customer relationship management system to help you gain insight into customer behavior. For each sale, determine the closing date, forecast stage, value and next steps. This information can help you create an accurate picture of upcoming sales and predict how the number of sales might change in the future.
2. Comprehensive
Sales forecasts should include information about all potential future sales, including ones that are less certain than others. Sales leaders need to work with sales representatives to find out what leads they are currently working on and how likely each sale is to close within the forecast period. This approach can help create an accurate sales forecast, although it requires a high degree of trust between sales representatives and their managers. Your sales reps need to know that you won't judge them for expressing uncertainty about their leads. Aim to create a supportive culture in your organization that encourages honest communication between sales reps and managers.
3. Defendable
Sales leaders must be able to defend the sales forecasts they come up with. When preparing your sales forecast, imagine you will be called into the CEO's office to explain the figures you have presented. Could you use evidence to back up your forecast? If not, you must go back to your sales forecast and include more data in its presentation. Every prediction you make should be tied to specific data. Try to make it as easy as possible to understand how you got from the raw data to your forecast. Taking a transparent approach to sales forecasting makes it easier to explain your work to the CEO or CFO of your company.
Sales forecasts are essential for all businesses, as they allow everyone to know what revenue companies can expect to accumulate in the near future. However, it can be difficult to create a sales forecast that offers real value. By focusing on making your sales forecasts accurate, comprehensive and defendable, you can ensure they are as valuable as possible and provide great insight into future earnings.
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