Why Should You Care About Your Sales Forecast?

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Written by on . Posted in Forecasting, Sales Methodology No Comments

Forecast Chart

There is no sales team or sales professional who does not have nightmares when the time for the forecast meeting arrives. Although most professionals do not treat it this way, this word is of crucial importance in the sales activity.

I could write pages about the importance of forecasts to the enterprises’ financial planning, and on their manufacturing, logistics, and HR processes. We could also talk about the forecast’s importance for the organization’s credibility and its management processes, or a myriad of other aspects that makes this practice so essential.

However, I prefer to invest some time to show that it is the salesperson himself who has the most to benefit from an accurate forecast. He just needs to get it out of his head that the forecast is a management pressure and control instrument, and believe that it is a tool that can be used in everyday activities and which can greatly improve his performance.

One of the most powerful indicators for continued sales success, according to CSO Insights, is the sales percentage exceeding the expected amount in a given period. “I’m 12% over my forecast.” For this reason, a trend of considering the forecast accuracy as one of the components of the salespersons’ compensation package has been noticed in recent years, since the higher this precision is, the better the required action planning in order to fulfill sales goals.

It is said that “bad news given early is good news.” In this case, that homily is perfectly applied. A forecast lower than the goals, assumed in the middle of the quarter, allows the salesperson to redo his planning, seeking more opportunities in his sales funnel, working with marketing to generate and qualify more leads, prospecting more or even establishing actions that can reverse situations where the chances are not good. Maybe it’s time to think about alternate strategies and tactics.

On the other hand, a forecast within or higher than the goals gives the salesperson peace of mind to maintain margins and prices, and allows him to start work for the following quarters.

The forecast is a thermometer of what might happen.  If taken seriously, it will be used by managers to trigger coaching and by salespeople as a warning so that corrective actions are taken. The problem is that it is still normal to use sales forecast as a threat.

In the CSO Insights survey, the sales forecast accuracy and the percentage of salespeople who reach their quota has grown consistently in direct correlation to the adoption of sales methods and sales processes. Among the trends that are perceived in the sales management and execution for the next few years, there is an emphasis on the dramatic change in the way forecast will be used by sales teams as a management tool.

For this, it is necessary to rethink sales models and the way they are implemented in automation tools, so they are more easily understood by the sales teams and more flexible regarding adherence to changes in customers’ buying processes.

Traditional models such as stage-based processes stumble in the changes and adjustments common to today’s business environments. More modern ones, called dynamic and much more flexible, allow adaptation to each sales process on the fly. For this reason, dynamic model-based methods are gaining more and more acceptance from the major interested parties, salespeople.

In the same survey, roughly 15% of salespeople use some sales method that makes use of dynamic models, an increase over the previous year. 33% are still using methods considered traditional or formal. The performance improves 10% to 15% – higher forecast accuracy and quota compliance – for those using dynamic models in relation to others.

The trend for sales automation done right in the coming year certainly involves evaluating sales solutions that incorporate this new family of dynamic methods in their functionality. This is my tip for companies that need to better predict their sales and sell more!

Ed. The ASPEC sales forecasting routine creates forecasts in real time using the most current information. Forecasting is automatic based on an assigned probability that the program calculates. Forecasting is as simple as clicking on the Forecast View – no additional effort required.

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