“The goal of forecasting is not to predict the future, but to tell you what you need to know to take meaningful actions in the present.”– Paul Saffo.
Sales forecasting is an integral part of planning for businesses today. Making accurate and reliable sales revenue projections is skill companies use to develop powerful strategies for their current timelines and long-term plans.
Unfortunately, we can’t make crystal ball predictions! And luckily, you don’t have to.
With a strategic approach backed by data-driven insights, B2B businesses accurately forecast their sales revenue projections before closing the sale.
In this blog post, we’ll share five compelling sales forecasting examples to show how to use these forecasts and implement them into your business plan today.
Best Sales Forecasting Methods
1. Based on intuition
If your business is in its early stages and you want to estimate future sales, the absence of historical data can be a hurdle. But there’s still a way to get an approximate forecast: Ask your sales team to use their intuition to predict the period.
This can be done by analyzing current sales prospects in the pipeline, looking at any prospecting opportunities, and making an educated guess as to anticipated future sales. Although it may not have the accuracy of relying on previous data, it can be a good start for new businesses wanting to get their bearings and plan effectively.
2. Based on historical data
The historical sales forecasting method is a quick, simple solution that looks at past performance to estimate future sales. However, while the model can be used as a primary starting point to guide decision-making, its predictability is limited by the fact that it does not account for changing consumer demand or seasonal trends.
As such, this approach should not be considered reliable enough. Additional tools and data are required to gain greater insight into upcoming sales and make more informed decisions.
Although it may provide helpful rough estimates in some instances, using the historical sales forecasting method alone is an inadequate foundation for projecting accurate numbers.
3. Based on an opportunity
The opportunity stage sales forecasting method is a way to predict how likely it is that a lead will become a customer based on where they are in the sales process. To calculate this, you need to know two things:
- The deal amount – how much money the customer could spend
- The probability of closing- how likely the deal will happen.
You can calculate your forecast for a particular period (like one month, quarter, or year) by multiplying the deal amount by the probability of closing each deal in your sales pipeline. Then, after doing this for every deal, add up all those numbers to get your overall forecast.
4. Based on multivariable analysis
Multivariable analysis and forecasting utilize predictive analytics to forecast sales accurately. To produce highly accurate results, there are several factors to be included, such as,
- The sales cycle length.
- Probability of closing- based on opportunity type.
- Individual rep performance.
While data-driven outputs can benefit organizations, a robust analytics solution or specialized forecast tool is essential for ensuring data remains clean and up to date for accurate projections.
5. Based on the length of the sales cycle
Knowing the sales cycle length is critical for businesses selling a product or service. Unfortunately, it’s difficult to predict how much time it will take from when someone first expresses interest in your product until they make a purchase. This can vary greatly depending on your target audience.
To ensure that you’re not overspending on marketing and promotion, an accurate forecast of the sales process will help you plan accordingly and allocate resources more effectively.
Complex sales may take significantly longer than individual sales to make a purchase as they require approval from their management team, which increases the complexity of the sales cycle.
Knowledge of each stage in the buying journey will give you better insight into what gives customers confidence when making decisions, allowing you to create a more efficient path to purchase.
As you can see, various methods are available to sales organizations that want to create sound sales projections. The key is finding the right mix of data sources and analytical techniques for your company and then applying them in a realistic and achievable way. When done correctly, forecasting can be an invaluable tool for helping you hit your targets and grow your business.