Pipeline forecasting offers many advantages and can ultimately help you to make better business decisions by accurately predicting your sales performance. But how exactly does one go about forecasting a sales pipeline?
In essence, your forecast paints a picture of what is possible when it comes to reaching your sales goals. In this article, we will explain all of the pipeline forecasting best practices so you can better predict your company’s future sales performance, and thereby offer your sales team the support they need.
What Is Pipeline Forecasting?
Pipeline forecasting refers to the sales opportunities present at a certain moment in time for a given company. It can be defined as the process of estimating how many deals will be under negotiation with a company’s potential customers.
A combination of pipeline forecasting and intelligent sales velocity modeling can also be used to get extended predictions beyond a company’s immediate pipeline. In essence, these extended forecasts can increase accuracy and deepen insights into current pipeline forecasts.
In simpler terms, a sales pipeline can be equated to every opportunity available to a certain salesperson. On the other hand, a sales forecast can be seen as the estimation of all sales opportunities that are likely to be realized in a certain period of time.
The Importance Of Pipeline Forecasts
You may be wondering why it is so important to know what is going on in your sales pipeline and how predicting future sales may impact your business. A recent study conducted by HubSpot Research showed a definite correlation between the number of sales opportunities in your company’s pipeline and your monthly revenue.
In other words, the more sales opportunities available to you, the more likely you are to reach your revenue goals.
However, if you are aiming at maintaining a healthy sales pipeline, then you will have to regularly assess your pipeline management which will also largely influence your ability to estimate accurate sales forecasts. In turn, accurate pipelines ensure you have accurate lead data which will help you to plan ahead in terms of sales forecasting.
Sales Forecasting vs Pipeline Management
Seeing as both forecasting and sales pipeline management can be considered as intertwined processes that influence each other, it can be hard to separate the tasks that fall under both sections. It is important to remember that one shouldn’t be prioritized above the other as both activities are crucial when it comes to growing your company’s sales.
When considering pipeline management, you must be cognizant of the practice’s two main goals:
- To build and maintain a healthy sales pipeline, and
- To ensure increased closed deals
Pipeline health can be divided into three key dimensions. These are contents, size, and shape. More deals are usually won when you provide specialized coaching to your reps on individual opportunities. When combined, increased new deals paired with a healthy pipeline can generate a more accurate sales forecast.
The Importance of Maintaining A Healthy Sales Pipeline
When it comes down to it, your sales forecast should resemble your most accurate prediction of the amount of revenue you can generate in a specific period. It can represent both the amount you’ll be able to confidently close in that time period and the best case outcome too. In general, the forecast amount resembles the estimated sales of the entire company in a given time period.
If you want to effectively meet your revenue forecast, you will have to manage your opportunities and leads. This is exactly why maintaining a healthy sales pipeline is so vital to ensuring success and exceeding your sales goals.
You can equate your pipeline to the top of the sales funnel. When it comes to ensuring the health of your pipeline, the top part of the sales funnel is actually more important. Because of this, pipeline and forecast strategy sessions should be kept separate seeing as sales forecasts focus more on closing a sale.
How To Forecast A Pipeline
By managing sales pipelines effectively, you can get a better idea of what sales opportunities are heading your way. Here’s how to go about pipeline forecasting:
Only Include Active Sales Opportunities
This requires your sales team to not only enter new opportunities into your CRM but also actively manage all sales opportunities and realize when those opportunities turn into lost leads. The following steps can help your sales team to ensure that their pipeline only includes active opportunities.
Firstly, you will need to develop objective goals or criteria that sales opportunities will have to meet at each stage of your sales pipeline.
At the top of your pipeline or sales funnel you might want to focus more on opportunity identification and figuring out which opportunities have high or low follow-through rates. Then, the middle stages may focus more on striking up an agreement, and lastly, the final stage would require deals being closed.
Adhere To Objective Sales Criteria
Every sales rep must adhere to the same objective criteria for each stage of the pipeline. Without strict adherence, it is likely that your sales forecast will not be totally accurate. Similarly, you’ll have to clearly stipulate what criteria should be met before a sales opportunity can move down the sales funnel.
Secondly, you should assign reasonable probabilities to each stage of the sales funnel. The lower the level of the sales funnels, the higher the associated probability should be.
These probabilities can be determined through reverse engineering deals that you have previously closed. Lastly, you will also have to track sales velocity to ensure there are only active opportunities present in your pipeline.
Advance Sales Opportunities Through Effective Pipeline Management
We’ve already established that a well-managed sales pipeline will lead to better forecasts. This means that every sales team needs an experienced manager that will help to advance and close more opportunities.
There are certain aspects you can concentrate on, to help your sales reps better qualify each opportunity available.
Firstly, you’ll need to determine the business needs of your customers. As such, you need to ask your prospective clients or customers some basic questions to ensure that you understand the exact problem they are experiencing and what it is that you can do to solve it.
Secondly, you must be clear on the unique value your company brings to the table. And, finally, you should determine who the decision-makers are within the organization. Ultimately, you and your team should have a good grasp of how and why your organization will beat its competitors.
If you can answer these questions, you can accurately determine if each sales opportunity is at the right stage of development, which means you have a healthy pipeline. This is key for accurately determining your sales forecast for a specific time period.
Calculate Stage Weightings Using Historical Data
For pipeline forecasting to be accurate, you must determine stage weighings based on historical sales data entered into your CRM. From this, you can quantify your rate of conversion, at every point of your sales funnel.
To ensure increased accuracy, you must evaluate how far each deal travels through your pipeline before being lost. Although acquiring this data may be hard work, with a quality CRM, it is definitely possible.
Through strong pipeline management, you will be able to accurately determine your sales forecasts for a specific time period. Not only is this a worthwhile investment in terms of increasing sales, but it can also allow your sales team to discover at what stage of the sales funnel they are losing the most prospective clients. So, you should begin working on your pipeline as soon as you can.
If you really want to take your pipeline forecast to the next level, then revVana should be your go-to. We can elevate it by forecasting the revenue coming off of your pipeline. Contact us today!