What is sales forecast, the driver of business processes?
How to make a sales forecast? Possibly you have already asked yourself this question and had this doubt after talking to someone connected to the business area or even reading articles on the internet.
But do you know what this really means? Or how important is it to your company?
Sales forecasting is the driving principle of successful companies’ businesses. This is because, based on forecasts made by specialists, industries are able to anticipate market needs and guard against market saturation.
In such a competitive market there is no room for guesswork or improvisation. Structuring and planning between sales teams and managers are essential for your company to be able to project the future – realistically and sustainably, of course.
The article we have prepared for you is about exactly that. About what it is and how to make a sales forecast, also explaining its importance.
We will discuss how you can plan it without a headache and how a CRM is a strategic ally in this mission.
Here we go?
What is a sales forecast?
The sales forecast is nothing more than the forecast of how much a company can earn in a certain future period.
It has long since ceased to be a mere exercise in futurology.
It is a fundamental part of the sales strategy that you simply cannot overlook.
Take into account that there is the influence of several factors that influence sales planning and forecast fulfilment.
It can be them or internal (such as opportunities in your sales pipeline, experience and routine).
Or else external. And that’s where competition, ideal customer profile, market seasonality, etc. come in, or even a truck driver strike as we saw in May 2018 in Brazil, for example.
It is important to reinforce this part. When we talk about consumption, it is necessary to understand that it is dictated by countless variables.
The country’s political stability counts for a lot – which includes the reliability of the government and the institutions that comprise it.
Unstable governments create great fear among investors to put money into that economy.
Another important consumption variable is the existence of financial crises or bubbles. In times of crisis, consumption shrinks and people consume what is essential, such as food and medicine.
In times of bubble, consumption tends to increase in such a way that demand cannot meet the market’s needs, increasing the prices of goods and generating speculation in the economy.
The forecast is like the weather forecast.
The first is based on meteorological and geological data, among others, to provide a projection of weather conditions (as accurate as possible).
The sales forecast will be based on micro data (from the team, the company, customers, prospects ) and macro data (competition, economic environment, market and segment situation) to anticipate commercial scenarios.
Why is sales forecast important?
As we said, a good sales forecast is a driving principle for successful companies’ businesses. More than that, it is strategic that you can estimate the gains you will have with your business.
From this, for example, you know how many and which new employees you can hire. Or what you can invest within your company, where resources can be channelled, among others.
Strategic planning and growth. These words must go hand in hand. Keep this in mind to understand how to forecast sales.
The sales forecast is undoubtedly the best indication of the company’s present and future in terms of results. And it helps for much more assertive and safe decision-making.
If creating the forecast is not a priority in your business, you are likely to have problems soon in your business.
Of course, for this, you must always take into account the peculiarities of your business. Companies are constantly struggling to adapt reality to what they are looking for. And this is portrayed in a study published by CSO Insights in 2017.
It says that less than half, only 46.9% of companies are successful within the sales projection they made. The medium-long term reflections of this I think you can imagine what they are, can’t you?
Take on this mission to avoid losses and plan, in a healthy way, the growth of your business.
Sales Forecast vs. Targets: what are the differences?
Understanding and talking about the importance of the forecast can even be easy. After all, any company wants to have credible forecasts of its sales in a period or even next week.
But what makes forecast different from targets?
While goals are drawn as objectives to be achieved or surpassed, the forecast is based on business intelligence ( Business Intelligence ). It provides insights and realistic data on the company’s timing and business performance.
Forecast without hard data does not exist even by a miracle. Data about the business, customers, current prospecting opportunities and external factors such as economic times, competition and seasonal performance are crucial to making adequate forecasts capable of delivering the true probability of being confirmed.
In order to have an assertive projection, it is necessary to analyze the entire sales funnel of the commercial, the conversions and the company’s sales history.
With these numbers in hand, it is possible to have projections based on the current customer base. For example, sales for the last three months with sales for the last six months, to look for differences and similarities between the two periods.
Thus, it is possible to have insights such as “out of every 10 opportunities that arrive at the follow-up stage, 8 of them materialize into business”.
How to calculate sales forecast
It is the sales forecast’s role to assess whether there is great marketing for a product, whether there are more advanced options, or whether the product is addictive, such as cigarettes and alcoholic beverages, which are resistant to economic downturns.
Also, the sales forecast must observe if there is a government incentive for the consumption of any product. One of the most common is the tax break offered by the government for some industrialized goods, the national generic industry, the easy credit system offered to farmers.
These incentives increase the supply and, through government campaigns to encourage consumption, create the need for the product among the population.
For a sales forecast to be successful, it is essential that the company hires a consulting firm specialized in the futures market. She will be responsible for analyzing the projections in four main scenarios (there may be others): the best scenario; the worst-case scenario; the most likely scenario; and the scenario to be avoided.
Obviously, the sales forecast does not deal with fortuitous events, such as possible accidents in factories, accidents that prevent the product from reaching its final destination, or a wave of spontaneous protests.
However, it still offers a predictability with which the industry can work to achieve the best results.
It is the forecast that brings a vision of future consumption closer to reality. It includes details of direct and indirect sales channels, not just sales history.
Calculating the forecast
Let’s get to work? To calculate the forecast, then, you need to follow a few steps. Are they:
- Discover your average ticket – To do this, you just need to do the following calculation: completed opportunities / summed value of completed opportunities;
- Find out your conversion rate – To do this, calculate: total number of opportunities/number of completed opportunities
- Finally, discover the average sale value – To do this, do: average ticket/conversion rate
Multiply the average sales value by the number of active opportunities (weekly or monthly) and you will have your sales forecast.
However, don’t forget to
- Segment the sales forecast by type of product or service of your company;
- Have similar metrics for your entire sales team;
- Work with a margin of error between 0% and 5%.
The mission of how to make the sales forecast became easier, didn’t it?
We published a short video to pass on one of the understandings about the concept: “Forecast”, which is being disseminated in the market, used mainly to support the improvement of the product mix (assortment) in retail, but also in sales projections for industries and areas services.
We hope that this will arouse interest in the subject.
Forecast, brings a vision of future consumption closer to reality, including details of direct and indirect sales channels, not just sales history.
CRM is an ally when making sales forecasts
A sales CRM is no longer a luxury, it is a necessity for companies. So there are valuable information and parameters that you lose by not using it (do you still fill in the data in an excel spreadsheet?). Even if you master the theoretical part, without accurate and reliable information, the practice is quite impaired.
Keep in mind: a reliable sales forecast needs accurate data to work. No matter how good your sales strategy or your leadership as a manager in the area, without organization and strategy, you will not be able to make the decisions correctly.
And here we are not talking about the use only for large companies. A small business CRM also helps with this task.
Only with a good CRM can you have the existing opportunities mapped within your sales funnel. From there, have a broad overview to define what actions should be taken. It’s a simple exercise to take full control of sales.
Run this analysis through your sales funnel. See indicated in which stages the leads need to pass and also the actions that are necessary for you, finally, to finalize the sale of your product or service.
Another fact that contributes to reaching the forecast (and that the CRM helps) is discovering the so-called predictable revenue of your company.
The partnership starts here
The sales forecast is one of the features of CRM PipeRun. It provides this information (as per account customization) at each step of the sales funnel.
PipeRun allows you to create multiple pipelines in CRM to meet all your business needs. Marketing, pre-sales, success, among others. Also, after winning an opportunity in the sales pipeline, you can duplicate it for your team to work on customer success.
If an opportunity stagnates, you define a maximum period that it can be stopped in the stage. As soon as this deadline expires, PipeRun will notify you. By acting assertively, you won’t lose a deal for lack of action.
But if you are unable to complete the deal, you can monitor the reasons for loss to further evaluate and correct your actions and offers. Your sales process and your ROI are grateful.
So, how can we help you?
If you have any questions about how to forecast your company.
How to make a sales forecast? Possibly you have already asked yourself this question and had this doubt after talking to someone connected to the business area or even reading articles on the internet. But do you know what this really means? Or how important is it to your company? Sales forecasting is the driving principle of…