Top Tips for Sales Forecasting
Sales Forecasting is never easy. There as many reasons why forecasts are missed as there are customers—the economy, misunderstood sales pipeline, etc. And in some business over achieving the sales forecast is almost as undesirable as underachieving. It is know that Wall Street frowns on management teams that are not in full control of the business, as demonstrated by missing a forecast by significant amounts—positive or negative. The accuracy of sales forecasting needs new thinking from you and your management. What can you do to improve your forecast accuracy?
Sales Forecasting Tip Number One: Basing the sales forecasts on the existing sales pipeline. There is no better information upon which to base a sales forecast than the set of opportunities being worked on at the moment, which is your the sales pipeline. Your existing pipeline may not cover all the revenue opportunities in your forecast, but still be very careful when you “assume” you future pipeline will be significantly better than your current one. Unless you have specific plans in place to build a larger pipeline, don’t assume one. If you want an accurate larger forecast, start by building a larger pipeline.
Sales Forecasting Tip Number Two: Recognize that not all opportunities are created equal. Your forecasting model must be fine tuned to reflect the makeup of the sales pipeline. Opportunities can be grouped into two groups. Most of our clients have pipelines or sales forecast that contain several “key” opportunities—large value opportunities that will make or break the chances of meeting quota. And then there are all the other opportunities in the same pipeline. These opportunities will require different evaluation.
Sales Forecasting Tip Number Three: Perform forecast post-mortems. All business processes must continually look at what worked and what did not in order to improve their effectiveness. Forecasting is especially subject to this inspection, of forecasts that were not met, and of those that were—of forecasts that were over-achieved, and of those over-achieved. The forecasting process should be continually examined to improve it.
Sales Forecasting Tip Number Four: Use Sales Forecasting Software where possible. A great way to see Sales Forecasting software in action is with our excel challenge.