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7 Proven Sales Forecasting Methods | DataStaples

Get A Reality Check On Your Business With 7 Proven Sales Forecasting Methods!

Building a sales forecast is an art and an accurate forecast keeps your business & leaders happy. In this blog, we will discuss various topics from designing a sales forecasting plan, tools to improve sales forecast with the necessary knowledge. A recent study from CSO insights shows 60% of the forecasted deals don’t close actually; hence choosing the right forecasting technique can make a huge difference in predicting your future revenue.

What Is Sales Forecast | DataStaples

There is a lot of companies that talk about sales forecasts; you may wonder what is sales forecasting? It is a technique that helps you to peek into the future. Yes, you read it right, sales forecast helps you to see what it more to look at the future is.

The fundamental of any business strategy is to help businesses to stay prepared & address the insufficiencies in the business. An accurate sales forecast allows salespeople & business leaders to make smarter decisions with clearing goals, hiring, budgeting, prospecting & other revenue impacting streams.

Forecasting fully works on the data requirement & application which helps to project future sales. A sales forecast can be as good as the data used. You may get a question does forecasting specialists use any types of techniques to study? It is highly dependent on the types of input data used in forecasting demand. When it comes to sales below mentioned techniques are used:

  • Qualitative Techniques
  • Time series analysis & projection
  • Causal Model

Each type uses its own methods, for instance, qualitative techniques use qualitative data while time-series focus on patterns & their changes. On the other hand, the causal model relies highly on the relationship between systems. With the combined efforts of all these techniques a salesperson, team, or company will seek weekly, monthly or annual sales.

Why Sales Forecast Is Important?

  • To predict the future
  • Plan for the growing demand
  • To make wise business investment
  • Identify & mitigate potential problems
  • Improve sales process

What Are The Different Types Of Sales Forecasting Methods?

The Lead Value sales forecasting method:

This method involves analyzing historical sales data from various leads sources & using those data points to create a wide forecast based on the attain value. As an experienced marketer, you can tell predict or tell when a buyer’s journey will end. By assigning value for each source or type you can get a better picture of finding how leads turn into revenue.

In order to succeed in this, the following metrics should be used:

  • Previous time of period of leads per month
  • Conversion of lead to the customer by any lead source
  • Average sales price by source

How To Calculate The Average Sales Price Per Lead:

Bucket the lead source based on the data set &  get the average sales price by any source. This can be achieved by any CRM tool with strong marketing or reporting functionality.

For instance, you can get website leads close to the average of $1000 per customer while leads that request for demo close at $1500 per customer.

Calculate The Average Lead Value:

Multiplying the average sales price by the average close rate for that source provides you the lead value per source.

Average Lead Value=Average Sales Price*Conversion rate from the lead to customer. The average sales cycle may vary for each lead source. The business initiative might improve the conversion rate in the sales process, price change or discounts, etc.

Opportunity Creation:

With the collected demographics & behavioral data, you can predict which opportunities are more likely to close. This generally works based on the characteristics of the business model & how it closed in the past. This may be often referred to as a trend or characteristic of the potential customers. A Scoring system is introduced based on the score assigning at each stage. Leads can be scored between scores ranging from 1 to 100, where 100 is considered to be the best fit. Accumulated leads can be grouped based on groups as A, B, C & D for ease of use.

In order to work this method, you need to define business criteria & evaluate them. Build an opportunity scoring system, so that you can automate the entire process of the lead scoring system.

Benefits of Opportunity stage forecasting:

  • All calculations are objective
  • It is easy to establish a sales forecast.

Survey The Potential Clients:

Survey The Potential Clients | DataStaples

This is one of the proven methods in conducting a deep survey of your potential prospects. You can collect the list of potential buyers who has strong records of proven sales forecasting methods. This involves direct involvement or telephonic interview or asking relevant questions.  By asking relevant questions you can determine the level of interest that the buyer has in your products.

Projecting Sales Data:

Projecting Sales Data | DataStaples

Projection is one of the widely used sales forecasting methods. In this technique, you can forecast sales by projecting historical data collected so far & how it would work in the future. This method is applicable only for existing methods and it doesn’t apply to new firms or organizations which are planning to launch new products.

Time Series Analysis:

This method is one of the most popular techniques which forecast sales analysis. With the collected details of data about the product or product line, you can use this time series analysis.  If you have clear trends or relationship about any product or their patterns or trends, then time series analysis is doing worth.

Time Series Analysis | DataStaples

With the past performance of the product, you can get the current performance rate & implement a plan to change the current performance. With a clear picture of time series analysis, you can find the trends in data, clinical performance patterns, any systematic variation & growth rate trends.

Length Of Sales Cycle:

The actual time taken for converting taken to converting a prospect into the customer with available data & time is termed as the length of the sales cycle. It is a pure calculation of how the sales cycle works. For instance, when a sales cycle lasts for six months & a sales rep engaging it for 3 months, then it has a 50% probability of closing the deal efficiently. Here, you can see how to calculates the length of the sales cycle:

Length of Sales Cycle | DataStaples

With the initial & the final stage of the sales cycle, you can frame the following equation, total days taken are equal to the number of days for first contact + customer conversion.

Intuitive Forecasting:

Intuitive Forecasting | DataStaples

This is one of the important forecasting methods among all. The right person to answer this query is your sales person. Only he can give a correct idea about lead currently he is following up. Significance of this method is highly subjective sales reps can be optimistic & provide high estimates. Sales rep can examine the sales & potential value of prospects being followed.  It is highly dependent on the several factors before giving estimation. This method is completely relied on the sales reps who work closely with your prospects rather than collecting historical data.

Using Revenue Operation platform for sales forecasting:

With the emerging AI & automation, there a millions of new tools available for sales forecasting which is considered to be efficient & predictable? With trustworthy data automation & deep revenue insights you have an opportunity to progress & allocate resources based on the customer success & needs.

Multi variable forecasting Analysis:

Most sophisticated & reliable forecasting method is multi variable forecasting methods. These factors are incorporated from various sales factors, forecasting techniques, sales cycle length & performance

Multi Variable Forecasting Analysis | DataStaples

This is highly reliable, as it involves complex mathematics. For this you require clean & your sales rep must have proper records of deals & activities. For effective & efficient tracking sales forecasting is ideal to customize the reporting section of the CRM.

How To Forecast Sales:

  • Define a sales process for your Team
  • Set individual or team quotas
  • Make ample amount of investment in CRM
  • Choose appropriate sales forecasting methods
  • Keep your sales team well informed

Wrapping UP:

Find & try out various sales methods before settling for one. This is purely on the take where your business is today & where it wants to go in future. Start developing real time functions that will guide your business with real data driven techniques. To know more about sales forecasting methods & techniques you can reach out to us any time.