The Five Principles Of Sales Forecasting
Have you read our free ebook Building a Sales Forecasting Strategy That Works? In this post, we give you a sneak peek of the important points discussed in the book, including the five steps in building an effective sales forecasting strategy.
RELATED: 4 Bad Rep Behaviors That Lead To Inaccurate Sales Forecasting
In this article:
- Building a Sales Forecasting Strategy
How to Create an Effective Sales Forecasting Strategy in Six Steps
Building a Sales Forecasting Strategy
A strategic forecasting method can help a business increase revenue and improve efficiency. The importance of forecasts can’t be understated since they play a big role in determining a company’s investments and expenses.
Have time to spare? Check our in-depth guide to sales forecasting and our recommended steps in the full version of Building a Forecasting Strategy That Works. Get it here!
1. Define Sales Stages
The first step to building an effective sales forecasting strategy is to identify and define your sales stages. It’s important to know the sales process inside-out before defining your sales stages.
If you’re still starting to build your forecast, these points can guide you:
- What type of sales model are you running — transactional or relational?
- Create descriptions, milestones, and outcomes for the sales stages.
- What key steps does the customer go through in the customer journey?
- Define distinct stages.
2. Determine Stage Probability
Once you’ve determined your sales stages, it’s time to check the probability of your salespeople securing deals while following the sales process. This step analyzes the likelihood of a sales rep actually closing a sale.
Here are some ways to determine stage probability:
- Just shoot from the hip and have a sales rep or a sales operations specialist define the stage probabilities.
- Work with default probability by stage (a few CRMs or Customer Relationship Management have this built in). Typically, Stage 1 is 10%, Stage 2 is 25%.
- Run reports of deals closed won that show exactly what the probability is by stage.
3. Build Forecast Categories
The next step is to make forecast categories. These categories are dependent on the company’s internal business processes. In some cases, the categories may be assigned to sales pipeline stages.
A standard way of referring to these categories is essential so everyone is on the same page. Check out our table of forecasting categories in the full version of the ebook here.
4. Establish a Forecast Cadence
You now have your sales stages, probabilities, categories, and predictions. In the next step, you need to establish a forecast cadence to manage your data.
Regular sales forecasting meetings remind your team of their pipeline progress. It also keeps you updated on how much work still needs to be put in to achieve your sales goals.
5. Measuring Pipeline Metrics
Not all sales forecast strategies are set in stone and you’ll definitely encounter changes throughout your timeline. Thus, you’ll need to know which metrics you need to measure to determine progress and success.
Here are some metrics you can consider:
- Velocity of deals coming in
- Number of deals a rep manages
- Quality of the deals a rep makes
Having a good forecasting strategy can help your company improve efficiency to hit sales targets and boost revenue. It also helps sales leaders keep investments and expenses aligned with revenue forecasts.
Another thing to remember—ensure your strategy uses the right tools and methods. These go a long way in helping produce more accurate forecasts.
Download the entire Building A Forecasting Strategy That Works eBook here!
What are some challenges you encounter in making sales forecasts? Share them with us in the comments section below.
- Building a Sales Forecasting Strategy that Works
- 5 Strategies For More Accurate Sales Forecasting
- 3 Keys to Unlock the Potential of Sales Structure for Enterprises
The post The Five Principles Of Sales Forecasting appeared first on InsideSales.
- Tags: Forecasting Inside Sales Tips
- Xant Team