Sales forecasting is a real and age-old challenge for companies regardless of industry, product, or service. It entails estimating what your future sales will be based on past data and company strategy.
Many complete an annual top-down strategic business planning approach whereby the CEO and management will come up with an overall strategy that effects every division. Sales is usually tasked with a target such as “increase sales by 6% this year.”
Sales now incorporates that 6% required sales increase into their financial models (CRM’s – primary data source) and build new models resulting in a sales forecast that is passed off to division managers to figure out how their respective units will hit their new model quotas. This leads to strategy sessions with their sub managers and front-line sales reps to see what resources they will need or if they think they can hit their new prospective quotas.
Ideally this feedback lookup goes up and down until everyone buys in, appropriate resources are allocated and the team is ready to execute the Sales Forecast. Most stress usually happens during the early sales forecast planning phase with the point of the spear (the folks that actually have to make the sales).
From a sales rep perspective, having management tell you what the forecast is going to be, is nice. Figuring out how you’re going to accomplish it as well as buying into it is another matter!
In that regard, most senior managers will tell you that developing a good sales forecast is stressful because so many people’s jobs depend on it as well as their company’s future. So, back to our original question what is so important about a Sales Forecast?
A Sales forecast is critical for
· Creating clarity and agreeance on a company growth strategy
· Developing a business plan supporting sales efforts
· Product marketing strategy– when should new products be available to sell
· Production – how much should we make?
· Operations – what inputs do we need to hit sales goals?
· Finance – plan for highs and lows of sales cycle, when will we need cash?
· Sales managers – do I need to hire new staff to hit new goals?
At the end of the day most managers would agree that a corporate strategy should start with sales and marketing working closely together to develop an achievable sales forecast.
Product marketing needs to work early and often with Sales to decide what new products / services are wanted, coming online and when. Then they need to develop a training program with sales buy in to properly market the new product before, during and after the launch to meet forecast.
At the end of the day a great sales forecast is dependent on accurate and useful data from the field as close to real-time as possible. Every part of the organization lives and dies with it.
Helping everyone on the team understand why it is critical and why their input matters will lead to better planning and a more accurate as well as useful sales forecast everyone will buy into.
