Over our sales forecasting series, we’ve defined a blueprint for developing flawless forecasts during seasons of high change and low predictability. Following are key takeaways.
A Definition for Sales Forecasting, and Why It’s Valuable
Sales forecasting estimates a business’ future revenue. It gives revenue operations a critical foundation, helping triple company revenue when orchestrated efficiently.
Nearly 100% of companies that use industry-leading sales forecasting processes achieve their revenue targets, compared to just 55% that do not.
Read more in “What is Sales Forecasting & Why Does It Matter?.”
Notable Benefits of Sales Forecasting
Building a top-notch sales forecasting practice has many chief advantages:
- Aids nearly 100% target attainment.
- Propels 10% more annual growth.
- Doubles an organization’s industry competitiveness.
- Improves how well companies understand their customers.
- Quantifies the health of your entire enterprise’s operating rhythm.
- Bolsters sales analysis and insight.
- Enables continuous strategic planning across ALL revenue teams, not just sales.
- Streamlines cash flow, credit, and financing.
Read more in “Benefits of Sales Forecasting Precision.”
Roadblocks to Precise Sales Forecasting
Below are barriers that often obstruct businesses’ ability to produce consistently reliable forecasts.
- Unformalized forecasting processes.
- Inconsistent leadership visibility.
- Departmental silos.
- Insufficient expertise.
- Poor data quality.
- Poor execution of the sales process.
Read more in “6 Common Barriers to Accurate Sales Forecasting.”
Macro Sales Forecasting Models
Using both macro forecast models is key to formulating accurate sales projections.
- Bottom-up forecasts estimate a company’s future sales performance with spending plans by department. It begins with detailed customer and product information, and then works up to revenue. Because this forecast employs historical sales and production data, it provides granular information. It’s also easy to modify. However, flawed data tarnishes the projection, as does team member’s lack of skill.
- Top-down forecasting estimates the Total Addressable Market and the market percentage that the business believes it can capture. While top-down forecasts sidestep statistical outliers, which often appear in low-level details and individual examples, they may not accurately describe items or teams at an individual level—nor incorporate important industry nuances.
Read more in “Macro Sales Forecasting Methods.”
Micro Sales Forecasting Methods
Micro sales forecasting methods evaluate sales performance closer than macro models. Following are common methods:
- Length of Sales Cycle Forecasting relies on data for how long a lead typically takes to close and can incorporate data for different deal sources—such as cold leads, referrals, or upsell to existing customers. While these calculations are objective, they’re only as good as your data.
- Opportunity Stage Forecasting accounts for the stage of each deal in the sales process and simply multiplies each deal's potential value by its probability to close, then sums the total. These calculations are also data-dependent for accuracy, and they disclude opportunity age and size, as well as unidentified customer cross-sell and upsell opportunities.
- Intuitive Forecasting aggregates individual sales contributors’ pipeline forecasts. While this method doesn’t rely on historical data, it is subjective.
- Historical Forecasting assumes future results will match or exceed prior sales. While helpful in steady markers, the forecast falls apart if anything outside of the ordinary occurs.
- Multivariable Analysis Forecasting is the most sophisticated sales forecasting method, combining all models into one complex, analytics-driven system. The catch? It requires an advanced analytics solution and clean data.
Read more in “5 Micro Sales Forecasting Models.”
In today’s pressure-filled world, revenue leaders in sales, marketing, and customer success depend on effective sales forecasting. Below are best practices that our industry-leading customers cite the most often.
- Define and execute your sales process.
- Approach forecasting with a continuous mindset.
- Include all revenue teams.
- Combine macro and micro forecasting methods for utmost precision.
- Build every decision’s foundation with data.
Read more in “Today’s Hottest Tactics for Sales Forecasting.”
Key Technology Players
A recent CFO Alliance study shows that ultimately, sales forecasting solutions that are part of a broader sales performance management platform effectively solve common data challenges by helping organizations:
- Lower the time spent on data entry and retrieval up to 70%.
- Deliver precision for 99% of data and compensation payments.
- Pinpoint and address possible threats sooner.
Following is an alphabetized list of sales forecasting technology vendors, which includes Intangent’s partner, Xactly.
Read more in “Key Vendors of Sales Forecasting Technology.”
To operationalize sales forecasting in your organization, download our just-released eBook, “Sales Forecasting in the Next Normal.”
You can also schedule a conversation here.
VP of Marketing