Why sales forecasting accuracy is important? There are many reasons why sales forecasting is a critical factor for business growth. Keeping forecasting accurate, however, is also equally important.
There has been rather extensive research done on sales pipeline management which forecasting plays a major part in. The Harvard Business Review found that businesses with effective pipeline management have a 15% higher revenue growth than those that had ineffective pipeline management. (1)
Despite this, many sales departments have a hard time producing accurate sales forecasts. Thankfully, you can check this list of tips to help improve sales forecasting accuracy. Before you dive in, go over this definition first:
4 Tips To Improve Sales Forecasting Accuracy for Business Success
What is sales forecasting accuracy?
A sales forecast predicts what a sales representative, team, or business will sell either weekly, monthly, quarterly, or annually. It goes much further than this, though, as it’s not just about coming up with a number and attempting to reach it. It’s about carefully inspecting your sales process to execute your sales predictions. Your forecasting accuracy is really just a term for how close you come to actually hit your goal.
Knowing your sales forecast and understanding how accurately you’re getting there can help your business determine things such as how much room they have to invest in growth if they need to cut spending or more. The more accurate you are, the more likely your business can operate as smoothly as possible.
Consult an expert
Getting advice from an expert is almost always a good thing to do. This can be especially helpful if you don’t have accurate or any past data to work off, as suggested in the first tip. This might be because you’re just starting out or trying out a new service or product.
When considering potentials, remember to look for someone that knows the true nature of the market in which your business deals. They should have specific industry experience and insights into competitors. Sometimes, no matter how hard you research, you can’t turn up the same valuable information as someone who has real first-hand experience. This is the difference between making a guess and making an educated guess.
An expert doesn’t have to be outside. They can be a seasoned staff member. Not only will they have previous experience but a stronger understanding of the business. An expert might even be someone who can lead you to or be able to manage the best forecasting software for your business.
Use past data
Using previous sales data can work as a great basis for analyzing and drawing up a new sales forecast. Working off this as a place to start, you can list all the varying factors that could possibly increase sales in the coming year. Are their new trends relevant to your business? Are there new market opportunities? Has there been a rise in demand for your service or product? The answers to these questions can be useful in predicting your future sales and increasing your forecast appropriately.
You would, of course, calculate the same for the opposite and use any aspects that could decrease your sales to amend your forecast. There might be new competition in your industry or upcoming regulation changes that might affect your business offering.
With your accurate sales forecast, you can take a look at the specific factors that will impact your sales and help plan your sales process to actively address them. With research indicating that less than 75% of sales forecasts are accurate and that success and failure are usually measured in margins less than 25%, these forecasts aren’t worth much. It’s clear to see why past data is needed to improve this accuracy. (2)
Focus on demand oversupply
A key thing to remember is not to focus on the supply of your service or product. You should focus on the demand, then account for the supply suitably. This will help your money-making estimations, ensuring you don’t over and underestimate how much supply you’re going to need. This can save or even make you a lot of money.
An example of this would be if you supply 100 computers a month, but the numbers show your demand is closer to 150 computers. Forecasting this accurate demand beforehand can allow you the space needed to figure out how you can grow your production and meet this projected demand.
This is the great power of sales forecasting.
Keep up to date
A lot can change in a year. It’s important your sales forecast stays up-to-date so that it can maintain its value.
You may or may not be aware that your sales process goes along with your sales forecast as if they were a pair. This means if your process changes, your forecast should change alongside it. The impact of your sales process isn’t just affected by your sales team. Any significant change in your business can trigger this, so a new marketing direction, a shift in OKRs, or reprioritization can impact your sales process. Ultimately, these things would also affect your sales forecast, and an update would need to be made. iness with.
Your customer relationship management (CRM) team needs to be in place to handle each stage of the modern-day sales funnel or pipeline that focuses on the relationship at hand.
Knowing your audience is extremely crucial!
Accurate forecasting can make such a big difference for your sales process and pipeline management. It gives you the ability to see potential problems, advantages and can even impact sales before they happen. Your marketing, sales, and business plans can all benefit from accurate sales forecasting.
Now you have the tips. You can go ahead and forecast to bring about company-wide efficiency and profit.
1. “Companies with a Formal Sales Process Generate More Revenue,”
2. “Sales Forecast Accuracy: The Results Are In & It’s Not Pretty,” Source: https://uplandsoftware.com/altify/resources/blog/sales-forecast-accuracy-the-results-are-in-and-its-not-pretty/