Sales Forecasting: Methods & Steps for Success
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Although each business has its own, custom way of working, generally product and sales teams are responsible for generating sales forecasts. These predictive reports enable product leaders to confidently manufacture products in time to accommodate customer demand. And for the sales team, a forecast gives them a target to reach for introducing customers to a business.
However, a sales forecast is not only a guide for product and sales teams. During a single business quarter, it affects many teams in an organization, like human resources, finance, and logistics. For this reason and many more, it makes sense that a forecast needs to be generated automatically and accurately, such as on software like Salesforce Sales Cloud.
In the article below, we explore the subject of sales forecasting and how it supports business plans so teams can accurately and timeously achieve their goals. Join us to learn more.
Let’s get started!
What is Sales Forecasting?
Simply put, sales forecasting is an activity needed for planning, as it predicts future revenue for a business.
Importance of Sales Forecasting
As making profits is the #1 goal for many businesses, by performing sales forecasting, they can foresee what their future income could look like. The insights gained from sales forecasting are useful for determining the following:
Sales Forecasting Techniques
There are many forecasting techniques a business can evaluate to find the best ONE that fits its requirements. Or they could try a few sales forecasting models and compare the sales predictions against each another. Here are 4 techniques we think are valuable. Check which one works for you.
Intuitive Forecasting
The first technique we would like to discuss is intuitive sales forecasting. As its name suggests, it works with intuitive data, like the opinions of sales managers. These include beliefs managers might have about deals in a sales pipeline.
Opinions from members in the sales team are important because they are the closest professionals to deals. They have the best data, experiences, and insights into whether leads have a high chance of converting into customers.
Collecting intuitive data from people is a simple step in the sales forecasting process. All that is needed is to ask the sales team how confident they feel about a deal closing. Then, researchers can add the answers to Salesforce Service Cloud or any other data management tool.
However, intuitive forecasting should not be the only way you predict sales. Keep in mind that opinions are not facts and can be incorrect or exaggerated. So, if you are going to use this technique, do so with other scientific methods designed for sales forecasting.
Historical Forecasting
The next technique we would like to feature is historical forecasting. Businesses use this technique to study previous sales data and generate forecasts that explain how much income they would make in a year.
For example, after plotting last year’s income, a business can predict their current year’s income will be equal to that amount or more.
The benefit of using this technique is that its easy to plot and compare data, which can then be used to predict future sales. However, it is not 100% accurate because it fails to consider internal and external factors that could affect a sales forecast, such as:
Nonetheless, the historical forecasting technique is ideal for referencing data and adding important details to a sales forecast.
Statistical Forecasting
The statistical forecasting technique works with quantitative data and statistics, such as:
Since there are so many statistical variables affecting a market, it’s difficult to decide which ones to add to a sales forecast. Additionally, taking the time to figure out which statistics are worth adding to your sales forecasts could slow down your research and planning process.
However, this technique does give you the most accurate results when you study statistics that are important to your research.
Opportunity Stage Forecasting
Although there are more techniques, the last one we would like to discuss in our article is opportunity stage forecasting. This approach monitors a lead or opportunity closely in a sales pipeline. The belief here is that the closer the opportunity gets to the end of a sales pipeline, the higher your chances are of them converting to a paying customer.
To give you a real-life example, a customer who signed up for your newsletter is probably 20% likely to purchase a product. Whereas a customer who booked a demo of your software is probably 80% likely to purchase the product.
Businesses find that the opportunity stage forecasting technique needs to be reported on fairly regularly, like monthly, quarterly, or yearly, depending on sales deliverables. When deciding on the timeline for reporting, take into consideration the average length of a sales cycle or a set period discussed with the sales team.
Since the opportunity stage forecasting technique works hand in hand with the sales pipeline, it is important to note, it is only as accurate as the efficiency of sales pipeline management.
Biggest Challenges with Sales Forecasting
After making a sales forecast, you must still be aware that there are many factors that affect its prediction. For this reason, it’s wise to keep your plans flexible so business operations can adjust to the different factors that challenge a sales forecast. Here are a few obstacles to consider that might render sales forecasts incorrect:
Consumer Trends change continuously. They are the different buying patterns based on anything from demographic factors, preferences, or just a change of mindset, such as the rise in vegan foods, which would boost sales in a business selling vegetables but also decrease sales in a business selling meat products.
Economic Variables include inflation and interest rates. Another factor that falls into this category is unemployment. These economic variables can impact business sales unexpectedly (positively or negatively) when they occur, as they influence how much disposable income consumers have each month.
Competitor Actions like promotions or lower pricing strategies are not easy to predict. If competitors release good campaigns into the market, they could raise their brand’s popularity with your consumers. In this case, businesses can expect lower incomes that contradict their sales forecast.
Sales Planning and Forecasting Guide
As we learned, there are many unplanned factors that affect a sales forecast. Besides these, it’s impossible to predict the future. Literally, anything could happen. But humans are conscientious, and there are methods we have devised to try to predict and plan for the future.
Let’s take a look at a few of those.
Look at Historical Data & Trends
Extrapolation is the foundation of forecasting sales. It involves the practice of studying past purchasing trends and other data to predict the future of sales for a business. Analysts can use extrapolation to display graphs to stakeholders that show the number of sales over a period of time.
Incorporate Known Future Changes
However, we must remember while searching for insights in graphs, that just because a trend was popular in the past does not mean it will be in the future. This is especially true, if a product has reached the end of its lifecycle and is heading towards a decline in popularity.
Therefore, extrapolation needs to be combined with a good understanding of what might happen in the future, such as pricing strategies, competitor promotions, new customer types, changes to products, and the channels used for communicating with customers.
Anticipate Future Market Trends
Another strategic process used by businesses is market forecasting. It consists of many methods used to study a combination of historical data, current market factors, and other variables to predict future market trends.
With market forecasting, businesses can make informed decisions, correctly allocate resources to teams, and prepare for changes in consumer behaviors, technology, and business objectives.
It seems like a lot of data to collect and analyze, but market forecasting is helpful for planning business risks and shifting to better strategies that align with the evolving market.
Monitor Competitor Strategies
A sales forecast is not complete without understanding external factors in the market, like competitors. By conducting a competitor analysis and adding insights to historical data and economic trends, a business gets a more thorough multi-variable forecast. This type of forecast shows a business the impact that a competitor’s pricing strategies and consumer trends can have on the market.
For example, if a competitor lowers the price of products and services, they have a high chance of becoming more attractive to customers in the market. When customers choose a competitor over your offerings, it affects sales and ultimately business profits.
As you can see, paying attention to what your competitors are up to in the market is important. It will allow you to make flexible plans to adjust to new market conditions.
Use a Business Plan to Enhance a Sales Forecast
Sometimes small businesses are scared to make sales forecasts. The data analysis process is daunting and there are a lot of internal and external factors to consider for the forecast. But, it’s not about knowing everything in creating a sales forecast, and more about wanting to know your business well.
So, go back to your business plan and add a sales forecast. It will show investors and partners your expectations regarding expenses, profits, and business growth. You can start by keeping it simple if you want, like forecasting just sales.
A business plan can also be your tool to track sales forecasts. Remember to revise the sales forecast when you need to make corrections.
Principles for Success in Sales Forecasting
Predicting the future is impossible. There are a multitude of outcomes based on internal and external influencing factors. However, we don’t have super powers, so our next best option is sales forecasting. It gives us information that we can use to predict trends, and create plans that help us cope when failures or problems arise.
Sales forecasts also help us set realistic business goals to chase and achieve. Having unclear expectations or targets can greatly demoralize sales teams, and lead to a loss in employees working in an organization.
To enhance your sales forecasts, we recommend an understanding of key principles. They will help you make decisions based on data which can lead to the following results:
Let’s dive into a few key principles that can make your sales forecasting near-perfect.
1. Collaborate Among Teams
A sales forecast is helpful to all teams in an organization, and for this reason, they need access to it. Take a look at the table below for examples of how some teams use sales forecasts in business operations:
| Teams in an Organization | Use of Sales Forecasts |
|---|---|
| Finance Team | Sales forecasts recommend where financial professionals need to make quarterly and annual investments in the organization. |
| Product Team | Managers use sales forecasts to plan how many products need to be delivered to customers in the future. |
| Human Resources Team | Sales forecasts inform HR professionals of business requirements so they can recruit enough employees to deliver projects. |
These are just three teams that use sales forecasts, but there are many more who find it handy when planning achievable goals.
We recommend that your sales forecast is accessible in Salesforce Service Cloud for all teams to access and utilize. And when creating them, speak to key members from each department, not just the sales team, so you get valuable input on factors that could affect the market in positive or negative ways.
2. Base Your Sales Forecasting on Data
We explained that by using quantitative data and statistics, you can make sales forecasts more accurate. Once your data is reliable, you can also use predictive analytics on them. This data-driven research approach eliminates a lot of subjectivity from a sales forecast.
As the definitions and terminology might not be understandable to everyone across the departments in your organization, we suggest using ones that are common so all teams are on the same page. It will also save them the hassle of researching, asking co-workers for explanations, and just simply understanding the sales forecast.
3. Improve Over Time
The more you work with sales forecasts, the easier it becomes to create them in the future. Your unique business process can always be improved over time to create more accurate and optimized forecasts by using the insights gained from previous sales forecasting techniques.
4. Use Sales Forecasting Tools
If you don’t have the luxury to improve sales forecasts over time, you can use sales forecasting software. Trustworthy software, like Salesforce Service Cloud, works instantly and efficiently to give you accurate forecasts.
Since collecting and using customer data is the best practice for generating a sales forecast, you need a solid customer relationship management (CRM) platform. We suggest Salesforce as your go-to option, as it has tools to assist you in finding new leads, closing deals swiftly, and keeping existing customers happy.
Additionally, Salesforce is rated as the #1 CRM in the market, so you can trust it to give your business access to real-time customer data for sales forecasting. If you want to use Salesforce specifically for sales forecasting, you will find Sales Cloud extremely useful. It is designed for sales teams and can forecast revenue, which include:
Sales Forecast Example
Here is an example of what a sales forecast looks like in Salesforce. It has all the right information to help managers predict future sales.
TITAN Enhances Salesforce Sales Forecasting with Automated Processes & Customer Feedback
Even though each sales forecast is unique to a business, they all require accurate data to be closer to predicting the future of revenue generation. Whether you need to collect sales representatives’ opinions based on intuitive forecasting techniques or hard quantitative data that needs to be analyzed with artificial intelligence, Titan can support your endeavors.
Titan integrates directly with Salesforce in 3 simple no-code steps to sync customer data bi-directionally between your projects and CRM platform. Then build any web project you desire that instantly gets feedback from your clients. We suggest our Survey app for this project.
It enhances user experiences when customers are required to provide feedback on vital questions, which are required to automate sales forecasting processes.
If you decide to build a dynamic and responsive survey with Titan, you get to measure customer satisfaction levels, gather feedback, conduct market research, and generate sales forecasts on another level using Salesforce and NO code.
Titan surveys are also secure from end to end in Salesforce, as they follow standards required by HIPAA, SOC 2, ISO, GDPR, and other leading frameworks.
Although you can use Titan to create surveys in Salesforce that support sales forecasting processes, it is not the only thing Titan can do for your business. As a platform, Titan supports small to enterprise-level organizations by speeding up business processes and administrative tasks so teams can focus on higher-level tasks, like finalizing deals with customers.
As we learned in the article, building flexible forecasting processes is essential for the constantly evolving market. Titan can help you achieve this with zero code in Salesforce. Here are a few benefits you get when choosing Titan for Salesforce automation:
This is just a short list of enhancements you could get for data collection and streamlining any process. For a catalog of features that complement your unique Salesforce requirements, please feel free to contact us through one of our social media channels. We would be happy to chat!
Our Final Thoughts on Sales Forecasting
There are two vital questions that every business wants answered:
How much money can we make, and when can we expect the revenue to roll in?
These are daunting questions for the sales team to answer in key meetings. Exaggerating responses can lead to poor decisions being made for business planning across the entire organization.
However, a sales team can make forecasts that take into account a multitude of factors and reliable customer data to give the best advice. In the article above, we covered why these tools are important and the techniques you can use to make your sales forecasts more accurate and effective. But that’s not all, we dived into a few challenges of sales forecasting to keep you grounded in reality and provided some best practices to take your forecasts to the next level.
If you need assistance with collecting customer data accurately for Salesforce or automating business processes, make sure you check out our content above. We discussed how Titan can help you enhance user experiences, obtain accurate data, and nuke manual tasks with no code.
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Frequently Asked Questions
What is the main purpose of a forecast?
To paint a picture of the amount of sales a business could make. Then, leaders create plans to keep employees on track to meet the goals that lead to the predicted sales.
What does a forecast tell you?
The amount of money your business can make from selling products or services within a given time period, such as four months.
