Hey, it’s Ren. Welcome back! This newsletter took me a while to write.
I remember sitting at a long table in the main conference room at Alcatel-Lucent (now Nokia) on the 31st floor of Petron Tower in Manila many years ago.
There were floor-to-ceiling glass windows, and I could see the traffic below me. The cars look like little ants. I was probably hallucinating because of extreme stress.
I am on a call with the top management in France on a Polycom audio, reporting my sales forecast and discussing where the team was and where we would land that quarter and that year.
If you've been in sales for a while, you're likely familiar with the pressure in sales forecasting. Reflecting on those experiences, I now realise the invaluable lessons I learned from those sales forecasting calls.
Back then, our projects were valued at a minimum of 10 million, so the stakes were high. Missing a number could make or break our success.
Although not the most glamorous part of sales, mastering the skill of sales forecasting is crucial for any sales professional, business owner or founder to grow their sales revenue and business.
I am still amazed by the number of start-ups and businesses that neglect to set revenue targets and perform sales forecasts.
Regardless of the size of your business or start-up, it is crucial to establish a revenue target and regularly conduct sales forecasting. This exercise will provide valuable insights and help you evaluate your current position and make informed decisions.
By committing to this process, you can better understand your business and identify the necessary actions to drive your business success.
Let's dive in, shall we?
Why Sales Forecasting is Important
1. Achieve sales revenue target
Sales forecasting enables early identification of potential issues, providing an opportunity to pivot or make necessary changes.
Your ability to make changes is dependent on timely and accurate data. Being proactive allows you to adapt to changing circumstances and respond effectively to challenges.
Better sales forecasting can even lead to increased revenue.
If you can't measure it, you can't manage it.
2. Better decision-making
Sales forecasting improves strategic decision-making.
By analysing historical data, market trends, and customer behaviour, you can anticipate demand, identify potential risks, and make informed decisions about resource allocation, product development, and growth opportunities.
Yes, sales forecasting is challenging.
In large organisations, it would be:
Complex sales cycles
Long lead times
Uncertain market conditions
Need for close collaboration between sales and other teams
For start-ups and small businesses, the challenges are different. It might be the following:
Sales processes are not clear, or no proper sales process is defined
The initial sales team or founder do not have sales experience
Lack of sales predictive data
There are no clear revenue target
I can write a long list, but these would be the main ones.
How do you Manage Challenges in Sales Forecasting
Encourage Open Conversations within Management and Teams. Very often, sales teams are stressed to commit. You can ensure honest sales numbers by creating an open and safe environment for your salespeople.
Be consistent with your sales forecasting. If you hold weekly sales forecast meetings, attend every meeting and stay on top of the numbers.
Stay focused during forecast meetings. Don't get distracted by operational issues. Keep your team on track and have a clear, committed forecast.
Ensure you have the correct data.
Establish cross-functional alignment between sales teams and other support groups such as marketing, delivery and operations.
Leverage technology to improve forecasting if it’s available to you. Advanced CRMs can now create a predictive analysis of past historical data.
How to Forecast Sales
Step 1: Create a sales process
Have a written and agreed sales process.
Step 2: Set a sales target.
Establish a clearly defined revenue sales target and communicate it effectively in written form to each of your sales teams. It is important to set revenue targets for each month, quarter, and year. If you have a team, set individual and team targets.
Step 3: Select your appropriate sales forecasting method.
Each has its advantages and disadvantages. With Predictive Analytics and AI, you can get advanced. Choose what works for your organisation. Here are the major forecasting methods.
Opportunity Stage Forecasting assesses the prospect's position in the sales pipeline and predicts the likelihood of closing the deal. Companies segment their pipeline into prospecting, qualifying, demoing, proposing and closing. The further down the pipeline, the chances of successfully closing the deal increase.
Length of Sales Cycle Forecasting refers to estimating the duration or timeline required for completing a sales cycle, which includes all the stages from initial contact with a potential customer to closing the deal and finalising the sale.
Intuitive Forecasting predicts future outcomes based on intuition or instinct rather than solely relying on data or analytical models.
Multivariable Forecasting - Using Predictive analytics plus a combination of the above.
Step 4: Use your CRM
Start using a CRM or, if you already have one, fully embrace and leverage its power. The true potential lies in updating and actively utilising the data to drive results.
Best Practices in Sales Forecasting
Consistently review and update your sales forecasts.
Analyse your past sales data.
Collaborate closely with your other team members.
Leverage your CRM. If available, utilise technology for accurate forecasting.
Scenario Analysis and Contingency Planning
6. Train and develop your sales teams.
While Sales Forecasting can be tricky, these best practices will allow you to improve your sales forecasting skills and make the right decision at the right time to reach your sales targets.
There are many components to sales forecasting, and I may have overlooked some. If you have any insights or questions, please email me, and I will respond.
Thank you for being here, see you next week!
PS. Is there any specific topic you would like to discuss? Please feel free to share your thoughts.