11 Factors Creating Market Volatility and the Impact on Sales Forecasting

In this ever-changing market, volatility is reality and its influence is far-reaching. From economic fluctuations, to ever-evolving organizational priorities, sales forecasting and territory optimization is becoming even more challenging. Despite the uncertainty, the pressure to deliver on revenue is higher than ever. Minimizing the impact of volatility starts by addressing the source. Internal and external forces are hard at work, disrupting your path to repeatable and predictable revenue.

Internal Sources of Volatility

1. Distracted Sales Performance

The list of internal factors affecting sales performance is long. At the top of the list are distractions like unproductive meetings, manual admin tasks, pursuing the wrong customers, and lack of clarity on targets.

Seller mistrust is another factor. Frustration can come from a lack of transparency into their compensation plan, territories and sales targets deployed late, or unachievable sales quotas that demotivate even the best sellers. Add in insufficient training, and you have constant and costly seller churn. 

Limiting distractions for sales performance is key to ensuring that sellers remain focused, motivated, and aligned with organizational goals.

2. Misaligned Sales and Revenue Goals

In order to drive performance, there needs to be alignment to revenue goals across the organization. Misalignment can lead to individual departments measuring and rewarding on individual priorities. As an example, if a sales team is solely incentivized based on number of deals closed, they may prioritize closing deals quickly rather than focusing on long-term customer relationships. This can contribute to scattered efforts, missed opportunities and unbalanced resource allocation.

Working in silos creates internal competition instead of collaboration when teams reward their own success rather than focus on collective revenue growth. It often shows up as friction in the overall customer journey. Less silos, more unification is a topic widely discussed in the latest episode of What I Wish I Knew, How to Minimize Volatility


3. Sales Pipeline Management Challenges

Challenges such as inaccurate deal stage assignments, lack of visibility into deal progression, or poor data quality, can lead to revenue volatility. Inaccurate pipeline data can distort sales forecasts and impact revenue predictions. Speaking of inaccurate forecasting... 

4. Inaccurate Sales Forecasting

Especially with the external factors at play, how to accurately forecast sales is challenging. Revenue volatility can make setting and hitting targets a guessing game. It leads to under- or over-utilizing of sales resources and missed market opportunities. Inaccurate sales forecasts also make you slow to respond to market shifts, as you struggle to evaluate where and when to adjust your plans.

5. Sales Tech Stack Woes

On average, sales organizations have 10 tech tools in their stack. And rather than optimize the tech stack they have, often organizations keep adding on new tools to fill a gap. Different tech solutions deployed across different departments leads to limited, out-of-date and disconnected sales data and analytics. Not to mention, logging into 10 different tools each day can be a distraction from revenue-generating activities.  

6. Identify the Most Productive Sales Opportunities

A significant benefit of automating sales data analysis is the ability to pinpoint the most productive opportunities within your ideal customer profiles. Place your bets more confidently when you know which products, regions, or customer segments will yield a win for your team. Your sales team can prioritize their time and energy towards achieving successful outcomes that may have otherwise gone overlooked.

External Sources of Market Volatility

7. Compounding Economic Conditions

Inflation, rising interest rates, slow growth, tightened monetary policies, international conflict, cost-of-living crisis. Numerous economic conditions are creating a perfect storm of revenue volatility across the globe. Investors and buyers are more risk-averse and decision-making is less agile and less confident. 

8. Lingering Pandemic Impact

The 2020–2022 pandemic continues to influence revenue volatility and it will for years to come. As vaccines and boosters became available in late 2021, the result was extreme volatility in consumer markets. Suddenly, consumers shifted from an intense need for household and leisure products, such as recreational vehicles, to personal and business services. 

9. Inflation, Interest Rates, and Bank Failures

In the height of the pandemic, as workplaces shut down, many Americans financially struggled. Both the Trump and Biden administration provided relief through government stimulus programs and forgivable business loans. In total, the relief program spent over $5 trillion.  

A recent study attributes one-third of the inflation increase to government stimulus programs. The rest is related to supply chain issues and robust consumer demand. In Europe, inflation is also impacted by energy prices due to the supply disruption at the outset of the Ukrainian-Russian war.

In response to inflationary pressures, ten years of low interest rates have ended, resulting in the slow down of growth and employment. The sharp increase in rates led to the collapse of two regional U.S. banks. 

10. Supply Chain Challenges

During the pandemic, the increased demand for goods was met with closed factories, limited manufacturing, and reduced imports. Further, recent changes in U.S. tariff policy made importing goods from China more expensive. As a result, many firms are currently expanding and rebuilding their supply chains.  

As the pandemic-influenced demand for goods weakened, manufacturers and retailers were left with excess inventory – otherwise known as the “bull whip effect”. Goods' price inflation resulting from the pandemic’s excess demand is being met by goods’ price deflation, as demand disappeared, limiting sales opportunities in those sectors affected.

11. Climate Change

Corporate sustainability is becoming more of a priority, as concerns over climate change intensify. As a result, buyer behaviors are changing and government mitigation policy is expanding rapidly spurring investment in businesses and sectors developing cleaner products and services.

Where There's Market Volatility, There's Growth Opportunity

Amidst all of this market volatility lies a silver lining. It presents opportunities for innovation, even unlocking new avenues for revenue growth. For more insight into the factors affecting volatility, and a 5 step plan for building resiliency, get your copy of Martin Fleming's e-book: Revenue Resilience: Control Volatility with Confidence.