What’s The Secret To Accurate Sales Forecasting?
When it comes to sales forecasting, everyone wants accurate predictions. However, accurate sales forecasting is an art that not every firm has mastered.
Why is it that some companies produce accurate sales forecasts, while others struggle (and fail) to do so? Research shows that the approach businesses take to these forecasts has a significant impact on their success.
Barriers to Creating Accurate Sales Forecasts
In July 2015, the market research firm the Aberdeen Group reported the results of a survey it conducted about effective sales forecasting. One of the issues researchers examined was the barriers to accurate sales forecasts.
They discovered that 42% of respondents felt they didn’t have sufficient data on current deals in the pipeline. An additional 40% said they felt their sales reps were overconfident about their abilities to close sales. Thirty five percent believed that their sales teams weren’t accountable for the data they provided, while almost the same amount of respondents blamed managers for not ensuring sales reps provided accurate data. A little under a quarter of those surveyed didn’t understand the probability of closing sales in the pipeline.
What Do the Best-in-Class Do?
Aberdeen Group researchers divided survey respondents into lower performers and best-in-class. The best-in-class companies reported accurate sales forecasts more frequently than the lower performers.
Analysts discovered that the best-in-class sales forecasters were able to accurately predict their sales for a given period because they had a deep understanding of buyer behaviour. Decision makers knew when to provide extra resources such as customer references, product demonstrations, or executive involvement.
The leaders of sales departments at best-in-class companies weren’t making decisions based on gut feelings or instinct. They deploy forecasting and analytics software solutions that rely upon hard data, not salespeople’s hunches that a deal will close. Moreover, they have insight into the sales pipeline long before the end of the period, so they know which salespeople genuinely need extra resources to close the deal, and which deals aren’t worth pursuing.
Another thing that sets apart the best-in-class from underperformers is the willingness of decision makers to trust sales staff with the data from analytics and forecasting software. Aberdeen Group researchers reported that companies who gave their sales staff access to this type of information had a 24% year-over-year change in operating profit, while those who didn’t only realized an 8% year-over-year change.
The Human Factor
Researchers from the Aberdeen Group acknowledge that technology plays an important role in accurate sales forecasts. However, it isn’t the only factor.
During the course of their research, they discovered that the best-in-class companies work hard to retain top-performing salespeople. In spite of the power of data, sales are still a personality-driven business, and that will most likely never change.
Accurate sales predictions cannot be based solely upon your salespeople’s gut feelings or hopes. However, technology only goes so far. Companies that produce accurate sales forecasts balance the human factor with software for reliable results, leading to greater revenue and success.