Accurate and effective sales forecasting helps companies plan for future. Forecasting isn’t an exact science, and it can be an extremely frustrating process for many sales managers because an inaccurate report can cause serious problems for the company. Unfortunately, there is no universal solution for forecasting. The right method will differ from company to company, and will depend upon a variety of factors including the robustness of your CRM platform, the trust the company puts in its sales team, and old-fashioned intuition. Here are some of the most popular methods of effective sales forecasting.
Forecasting Through Opportunity Stages
In order to accurately forecast the chances of winning business, sales managers must develop a deep understanding of their pipeline and the stages of the sales cycle. Once they have the stages in place, they need to dig into the rate of success from each stage in order to forecast the probability of closing a sale. For example, if 50 percent of the deals that make it to the quote stage end up closing, you can forecast a prospect in that stage as having a 50-50 shot of success. Always remember that forecasting using stages is imperfect, but it is still a solid method of thinking about where your numbers are headed for the quarter.
Forecasting Through Regression Analysis
Regression analysis is a more mathematically accurate way to forecast, and it requires sales managers to have a firm grasp of tangible statistics as well as the intangible factors that influence the success of sales reps. When managers can infer the relationship between stats and variables, they’ve got a solid forecast on the table. Regression analysis is extremely accurate, but it is mostly reserved for large companies who can employ mathematicians and data analysts. Small- and medium-sized companies may not want to attempt to tackle this method of forecasting.
Forecasting Through Pipeline Intuition
This method of forecasting is best for sales managers who trust their reps. It relies upon those reps to offer insight into their own pipeline, rather than sticking to pre-set stages. For example, a prospect may still be in the qualifying stage, but a seasoned rep may be able to tell immediately whether or not the deal has a realistic chance of closing based on years of experience with that type of customer.
This type of forecasting isn’t always accurate, but it can provide sales managers and leadership with a decent long-range view of how sales will shake out. It takes savvy to get reps to be honest about their potential success, but the right team and the right manager can make it a worthwhile approach.
Forecasting Through Length of Sales Cycle
Another numbers-focused approach is to forecast based on length of sales cycle and the age of the deal. Sales managers must be able to calculate how long the average sales cycle is, and the probability of closing the deal over time.
This method allows teams to forecast based on different types of deals. They can be separated by new customer, returning customer, or existing customer; size of the potential quote; or even the source of the lead – website vs. cold call, for example. Accurate forecasting using this method requires reps to enter accurate information into the CRM at every interaction. They must understand how to properly tag and categorize everything in the system, so that predictions will be on point.
Successful sales teams are led by sales managers who not only motivate a team to sell – but who also have a strong sense of how numbers impact business. If your company is looking to attract the best and brightest sales managers and sales reps, contact the recruiting experts at CSS ProSeach today. We are a leader in sales recruiting and our experts have the experience to connect you with top sales talent that will drive your business forward.