In isolation, the word “forecasting” is one that we usually relate to weather reports or financial news. The clue to its complete reliability is in the name. It’s predicting an outcome or event based on patterns, evidence, and historical performance. In the case of the weather scenario, this allows a meteorologist to say there’s a percentage chance of fair weather versus the high risk of a hurricane. And for a financial analyst… you get the idea. Therefore, by adding one more word, what do we understand about sales forecasting, why is it so important and how accurate can we get by applying and using predictive methods? We shed some light on what it is, common issues of getting it right, and how sales performance management (SPM) tech stack can replace guesswork with certainty and success.
Why Does it Matter?
Before you move onto the main feature, which involves using sales tools to analyze the performance of a product or person, the sales forecasting stage is the “prequel”. Creating a forecast allows you to plan a roadmap for all eventualities and to mitigate any outcome. This means that you’re not entering a new territory blind to competition, buying trends, or local circumstances, nor adding to your team’s quota when in fact your analysis shows they are already stretched to capacity. By looking ahead in an informed, scientific, and rational way, you can see clearly what’s coming down the line. So how do you set about implementing a sales forecasting platform?
Does it Involve Magic Spells and Lucky Guesses?
In short, no. You may take a punt, or simply hope that sales of weighted blankets, for example, will exponentially grow in the Eastern region next winter (it will be cold, people need comfort, everyone loves a weighted blanket) but without analysis, context, or empirical evidence, career-wise, you’ll live or die on the outcome. As will your team, who look to management and leaders to provide them with the territories to conquer and the rationale for going after certain prospects. What we can say with a degree of certainty is that for sales and revenue to grow and prosper, you need an accurate sales forecasting platform.
What are the Potential Pitfalls of Setting Up Sales Forecasting Software?
Before we celebrate the positive wonders of selecting the right sales forecasting software, it’s only fair that we touch on a few of the possible missteps.
- Shiny and pretty isn’t always smart: While good-looking dashboards may attract attention, it’s important to dig deeper and ensure that your predictive software is exactly that. A decent demo and honest sales rep should show the full extent of capabilities, which in this case is sales forecasting. You can learn more about good looks versus functionality here.
- Integration and Accessibility is (almost) Everything: A sales forecasting tool can stand on its own two technical feet, but it’s only part of the SPM story. When you’re running those checks, ask yourself (and whoever is running the demo); does this integrate with my incentive compensation software? Is this something that my team could use and gain value from? Can I customize this to suit the changing needs of my business?
- Intuition is (almost) Everything Else: As we’re in talking predictive analysis, rather than historical or current, one sinkhole to avoid is a lack of intuition in what is being delivered. We’ve stated that this is all about removing the guesswork, so make sure that the sales forecasting software you’re looking at can take on information at economic conditions, fluctuations in the market as well as changes in the law or to your product.
The Benefits of Sales Forecasting Software
A sales strategy is very much based on actioning a constant flow of decisions, so it makes sense that implementing sales forecasting as a methodology will improve that process. Whether it’s a greater knowledge of when to enter new territory, making a call on discontinuing a product line, or weathering the storm of a global crisis, the level of preparedness (and subsequent resilience) can only be bettered when partnering with robust sales forecasting software.
While there are no assurances that every tactical and strategic move will naturally end in more profit, the likelihood is certainly greater when your decision-making is supported by accurate and reliable data. When your sales forecasting predicts potential growth, that can lead to you recruiting more staff, pursuing new areas, or conversely, if there looks to be a dip, you can mitigate for that without too much collateral damage.
Motivation is a positive takeaway and shouldn’t be dismissed as a soft advantage. When you’re sharing targets and leader-board positions, including sales forecasting means that it’s not just about applauding who is the biggest seller today, but showing who is potentially climbing the ranks and how they can close that gap. Forecasting tools are a worthy assistant when doing performance reviews as this is tangible evidence that can steer a team member to greater gain and success.
Are You Ready for Better Sales Forecasting?
Now we can confirm that sales forecasting involves no dark arts whatsoever, we hope you’re ready for a test run. Whether you’re looking to get more insight from your data or gain a tighter grip on future outcomes, begin your journey to more accurate reporting with Varicent today by booking a demo.