Importance of Sales Forecasting in business.
Every business must have sales forecasting metrics to gauge how much revenue they will make in the next year (or the next period). It helps to determine what business strategies to implement and for drawing annual budgets for the organization. But unfortunately, only a few of them understand the importance of sales forecast and have tangible sales forecasting metrics. Thanks to inaccurate forecasting methods based on intuition instead of data.
A company will see a massive downfall if it misses its deadlines and cannot forecast accurately over a long period. It wouldn’t know whether to expand or downsize the sales team and will miss many other opportunities. The best way to save yourself from these drawbacks is by relying on tried and tested data-driven processes that have delivered results over time.
Importance of Sales Forecasts
Making sales forecasts is essential for businesses across industries. The following are a few reasons that tell the importance of making accurate sales forecasts and how they benefit the company as a whole:
1. A sales forecast helps predict the cost and the revenue at the end of a fixed period.
2. Sales forecasting metrics help assign resources where they are needed the most. This encourages the judicious use of resources and eliminates resource wastage.
3. Sales forecasting metrics identify the loopholes in the sales pipeline and suggest a course correction strategy.
4. Sales forecasting metrics allows businesses to manage their cash flow.
5. Sales forecasting metrics enables companies in overall business planning, budgeting, and risk management.
The following are the four points you should keep in mind while building an accurate sales forecasting strategy.
1. Define the sales process funnel
The sales process funnel is a long and complicated document that describes the nitty-gritty of the sales process. Every company modifies it according to their target customer segment. It plays an essential role in the sales forecast as it provides a blueprint to the sales team regarding the following attributes:
a. Whom to call?
b. How to educate the customer about the companies’ products/services?
c. How to evaluate the customer?
d. How to provide logical answers and rational explanations to customer queries?
e. How to optimize the sales process?
f. How to improve the delivery process?
As far as the questions mentioned above are concerned, everyone must remain on the same page. The company will bear heavy losses if even one salesperson is out of sync.
2. Study the historical data
Historical data reveals a lot about how your company has been performing lately. You can build upon your strengths and work on your weaknesses to finetune your business strategy.
The following sales example will illustrate this better:
a. Prospect to customer conversion percentage in the initial calling stage = 5%
b. Prospect to customer conversion percentage for people who sign up for product demo = 10%
c. Prospect to customer conversion percentage for people who go through a product demo stage = 20%
So, if you expect to close 200 deals this year, you will have to generate 2,00,000 leads (2,00,000 x 5% x 10% x 20%). This way, you can find the flaws and defects in your sales funnel, and improve them at the earliest.
3. Invest in a top-notch CRM software
No business can even think of surviving, let alone competing, without making use of Customer Relationship Management (CRM) Software in the present day and age. The following points explain why:
a. CRM software suggests the most profitable customers out of a pool of numerous prospects. It allows the company to prioritize its resources — time, money, and workforce — on customers with a higher transactional value.
b. CRM software keeps a watch on employee productivity. It monitors the vital statistics and sends a detailed report to their respective managers.
c. CRM software keeps a check on competitors and the developments happening in the industry.
d. CRM software provides instant solutions to customers and build robust and long-lasting customer relationships.
The above article clearly explains the importance of sales forecast for every company. Sales is a core business function, and no company can think of operating smoothly without managing their sales department effectively. CRM software can be of significant use as it contains features that provide multiple benefits when dealing with customers and providing them best-quality services.
At Sage Software Solutions (P) Ltd., we are home to world-class ERP software and CRM software that will solidify your business tech support fundamentals and enable you to build a customer-centric organization. To know more about it, SMS SAGE to 56767. You can also write to us at email@example.com
Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.