Published on Thursday, May 4, 2023
Accurate sales forecasting can lead to improved supply chain management, steady cash flow, increased sales growth, and higher total sales. When you create precise sales forecasts, your sales reps can focus on strategies to meet or even exceed those sales projections.
But what is sales forecasting? Accountants, CFOs, and sales managers define sales forecasting as the process of predicting future sales for a given time period. Businesses use various sales forecasting methods to achieve accurate predictions.
As with any type of business plan, the data you use to generate your forecasts affects its accuracy. Having solid, real-time sales data aggregated from a variety of up-to-date sources leads to more reliable forecasting and better business insights.
How to Achieve Accurate Sales Forecasts
Creating accurate sales forecasts relies on the accuracy of the data and the reliability of the sales forecasting method you choose. Follow these seven tips to create more precise sales forecasts.
- Choose the best forecasting method for your business and stick with it. Consistency leads to accuracy in sales forecasting. After all, you can’t spot trends if you keep changing your forecasting methods.
- Refine your methods when necessary. Don’t be afraid to refine sales forecasting methods over time. As your business grows and accumulates data, you may need to adjust your forecasting approach to incorporate new insights.
- Be sure you’re considering all factors that could affect your business. Historical sales data only goes so far when it comes to predicting future sales. Include factors such as seasonality, new product launches, market trends, and personnel changes to generate a more accurate prediction.
- Keep forecasting simple. While you want to consider all the factors that affect actual sales, be careful not to make your analysis too complicated. Focus on the most impactful variables and avoid overanalyzing specific products or sales channels.
- Track discrepancies and exceptions. Focus your efforts on addressing significant deviations in your reports. Adjust your forecast to align with your sales goals and ensure you aren’t being overly optimistic.
- Make sure you’re using accurate sales data to start. Eliminate inaccuracies in past data by ensuring you are pulling it from the best sources. Consider using tools that pull real-time data to create more accurate reports.
- Use sales forecasting software rather than Excel spreadsheets to eliminate the possibility of human error. Many inaccuracies in sales forecasting stem from typos, transposed digits, or entering the wrong data in the wrong field. Sales forecasting tools automate the process by pulling real-time and historical data directly from your CRM, CMS, accounting software, and point-of-sale systems.
Sales Forecasting Examples
Now that we’ve looked at some of the ways to create more accurate sales forecasts, let’s explore examples of sales forecasts used by medium to small businesses and enterprise organizations alike:
- Intuitive Forecasting Example. A startup without historical sales data can create an intuitive forecast using factors such as seasonality, market research, current market share, and planned strategic marketing efforts.
- Historical Forecasting Example. A company with a few years of sales data can create a more accurate financial forecast based on actual sales and historical data.
- Length of Sales Cycle Forecasting Example. A company can track the success of its sales process after using marketing strategies and analyze how quickly leads move down the sales funnel.
- Opportunity Stage Forecasting Example. A company can provide more accurate predictions based on where prospects sit in the sales cycle and their probability of closing.
- Multivariable Forecasting Example. A multivariable forecasting analysis may yield more accurate results than any of the above methods because it combines multiple sales forecasting models to account for various factors that affect a company’s sales growth.
Sales Forecasting Methods
Understanding the various sales forecasting methods can help you choose the best one for your business.
The most basic of sales forecasting methods, this relies on educated guesses from salespeople to predict future sales for a given time period.
Companies with historical data to review may use historical forecasting to create objective forecasts and aid in creating a realistic sales plan.
Opportunity Stage Forecasting
Companies with accurate data about their sales pipeline, typically tracked through a CRM like Salesforce, can create accurate sales forecasting by looking at where each lead sits and its value based on its probability of closing.
Length of Sales Cycle Forecasting
Similar to opportunity stage forecasting, length of sales cycle forecasting relies on accurate data regarding your sales pipeline. Rather than looking at the probability of closing, it evaluates the time a lead should take to close.
Multivariable forecasting combines the other techniques to create a sales forecast that explores the business from all angles to predict future sales and sales growth with accuracy.
Automate Sales Forecasting with revVana
However, many enterprise-level organizations find a better way to create accurate sales forecasts with revVana Plan, a sales booking management, business planning, and forecasting software that integrates with your CRM to eliminate inaccuracies. See how revVana can help you create more accurate sales forecasts today.
In conclusion, understanding and implementing the appropriate sales forecasting methods for your business is crucial for its growth. By using accurate data, refining your methods, and employing the right forecasting tools, your company can enjoy better supply chain management, steady cash flow, increased sales growth, and higher total sales. Start leveraging sales forecasting examples to achieve better business outcomes today.