Sign up for the beta list
Thank you, we have received your contact details!
Please check your inbox to verify your email address.
Oops! Something went wrong while submitting the message.
Sales Forecasting- in a Nutshell

October 4, 2022

Sales Strategy

Sales Forecasting- in a Nutshell

If you're in sales, then you know that forecasting is essential to success. But what's the best way to forecast sales? Here's a quick and easy guide to get you started.

Sales Forecasting, sales process, forecasting, methods

What exactly is sales forecasting?

Sales forecasting means predicting future revenue by estimating how much product or service a sales unit will sell in the coming defined period. A sales unit refers to an individual salesperson, a sales team, or a company.

A sales forecast is a projected measure of how a market will react to a company's go-to-market efforts.

Estimating your sales is essential to make credible, evidence-based sales projections. This estimation will help business owners to plan their business strategies.

Why should you consider sales focusing?

Forecasting sales is necessary for a variety of reasons, including:

  • To allocate future resources efficiently: Forecasting allows you to plan your stock and inventory and hire employees as needed. Knowing what it takes to grow ahead of time would be beneficial.
  • To Accurately estimate revenue and investment plan: When needing funds to allocate resources, and with an accurate sales forecast, you can determine when your company will have enough funds to make the investment you intend to make.
  • To identify problems in the work process: Sales forecasting allows you to identify issues as they arise. When something unusual occurs, you will become aware of it and take the necessary action. E.g., a 30% ROI decrease indicates t a problem in the work process that needs to be addressed. The problem can be detected early on and handled better than waiting for it to become complicated.
  • To Establish an overall business objective: Continuous sales forecasting allows you to allocate resources, hire a workforce, identify problems, and manage risk. This allows for working on strategically planning of your business goals.
  • To Facilitate growth by improving decision-making: Forecasting allows for spotting red flags before they become nightmares affecting business. You are more likely to grow as an organisation with accurate sales forecasting.

Sales Forecasting Methods

Although different businesses have significantly other sales structures and processes, a significant proportion uses one or a combination of the primary approaches to sales forecasting listed below:

  1. Test-Market Analysis Forecasting: You can use this method to introduce your new product/service to a specific group of people based on their market segmentation. For example, you could test the product in a small geographical area to see how well it sells. This result is then analysed and used to make an accurate forecast for the entire release. This Forecasting method is helpful for large companies that are launching a new product and want to understand the market reaction, as well as startups doing a soft launch to increase brand awareness. However, when using this method, remember that not all markets are the same - what occurs in one market may not happen in another.
  2. Sales Cycle Length Forecasting: This focusing method uses information on how long it takes a prospect to convert into a paying customer successfully. This method is entirely objective, and it's not based on the sales rep's positive gut towards a potential customer. Also, depending on the source, the procedure can be applied to various sales cycles.
  3. Intuitive Forecasting: The Intuitive Forecasting method is based on your trust in your sales representatives. You begin by asking them how certain they are that their sale will be completed and when. It considers the sales reps' opinions, as they are the ones closest to the prospects and know-how; they are most likely to understand how things are going. The disadvantage of this method is obvious. It's entirely subjective. The reps are naturally optimistic and will most likely provide generous estimates. The strategy needs one to go through the sales reps' interactions with the customer to be verified.
  4. Opportunity Stage Forecasting: In this method, you examine the prospect in your pipeline and calculate the likelihood of the deal closing. Companies can divide their pipeline into stages, such as generating leads, eligible, demos, quotations, close, and so on, and track everything with sales pipeline software. Generally, the further down the prospect's pipeline, the better the chances of closing the deal. To implement this technique, the analysis and understating of past performance are needed to reasonably estimate the success rates for each state. Despite being a data-driven prediction, it isn't wholly accurate. Opportunity Stage Forecasting does not consider each deal's distinctive features, such as the lead's age. A prospect, e.g., could be in the trial stage for two months and have the same success rate as a hot lead which reached the trial stage in a matter of weeks.
  5. Lead-driven Forecasting: This forecasting method entails analysing each lead source, assigning a score based on the similarity of leads in the past, and forecasting based on that value. By giving importance to each lead source, you'll better understand the likelihood of each lead converting into revenue-generating clients. The following Matrices are needed for this Method: Leads per month for the previous month; Source of prospect-to-customer conversion rate; Source-specific average sales price. However, this data-driven forecasting is subject to change. E.g., suppose your marketing team changes its lead generation strategy to align with current trends. In that case, the number of leads from various sources may change, affecting your lead-to-customer conversion rates. To lower the varying results of this method, stay up to date on the latest changes and factor them into forecasting.
  6. Multivariable Analysis Forecasting Method: The most advanced sales forecasting method, multivariable analysis forecasting, integrates several factors, including average sales cycle length, the likelihood of closing based on prospect type, and individual rep performance. This forecast is usually the most accurate. However, it necessitates an advanced analytics solution, which is not always feasible if your budget is limited. Data cleaning is essential if your sales reps aren't tracking their progress and activities in deals; no matter how good your software is, your outcomes will be inaccurate.
  7. Pipeline Forecasting Method: This method needs a program or software to run the focus. Otherwise, it proves to be cumbersome. It analyses each opportunity in your pipeline and calculates its chances of closing based on specific company variables such as the rep's win percentage and opportunity value. It depends on your ability to supply high-quality data. You will have worthless forecasting if you mistake the numbers or use incorrect data. To get the most out of this method, ensure your reps regularly enter accurate, timely data into their CRM.

How shaky are sales projections? According to Gartner, 55% of sales leaders and 57% of quota-carrying sellers lack confidence in forecast accuracy. While you might expect this situation to improve over time, Gartner predicts that by 2025, "90% of B2B enterprise sales organisations will continue to rely on intuition rather than advanced data analytics or their B2B CRM, resulting in inaccurate forecasts, sales pipelines, and quota attainment."

Related SalesLeaks

Risiken in der Vertriebspipeline - Wie kann man sie minimieren?

Risiken in der Vertriebspipeline - Wie kann man sie minimieren?

In der Vertriebspipeline gibt es immer Risiken, aber es gibt Möglichkeiten, diese zu minimieren. Hier erfahren Sie, was Sie wissen müssen, um Ihr Unternehmen zu schützen.

October 12, 2022
Sales Forecasting- kurz & knapp

Sales Forecasting- kurz & knapp

Wenn Sie im Vertrieb tätig sind, dann wissen Sie, dass Prognosen für den Erfolg unerlässlich sind. Aber wie lassen sich Umsatzprognosen am besten durchführen? Hier ist ein schneller und einfacher Überblick, der Ihnen den Weg weist.

October 4, 2022
Unser Sales Coffee mit Janine im Recap

Unser Sales Coffee mit Janine im Recap

Am 07.09.2022 trafen sich die Dealcode Founder mit Janine Will zum Sales Coffee. Thema des Live-Talks: Sales Tech. In diesem Beitrag haben wir ein paar Fragen und Antworten zusammengefasst.

September 20, 2022
Risks in the sales pipeline - How do to minimize them.

Risks in the sales pipeline - How do to minimize them.

There are always risks in the sales pipeline, but there are ways to minimize them. Here's what you need to know to protect your business.

October 12, 2022
Our Sales Coffee with Janine - the Recap

Our Sales Coffee with Janine - the Recap

Am 07.09.2022 trafen sich die Dealcode Founder mit Janine Will zum Sales Coffee. Thema des Live-Talks: Sales Tech. In diesem Beitrag haben wir ein paar Fragen und Antworten zusammengefasst.

September 20, 2022
The future of sales - Redefining sales.

The future of sales - Redefining sales.

In a rapidly changing world, it is more important than ever to stay ahead of the curve. However, many businesses are still relying on traditional sales methods. We believe that the future of sales lies in digital channels and customer-centricity.

August 23, 2022

#WeHackSales

Stay updated and Make your B2B Sales Data-driven

We will help you grow with great content.