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How To Use Forecasting To Better Align Your Sales and Operations Goals

August 5, 2021 | Tanya Goncalves  
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What does the future hold? Where are you going in the month, quarter or year ahead?

For sales and operations teams, answering those questions can play a critical role in helping to set sales goals and build successful processes to meet them. Goals and processes that help your entire organisation thrive.

That’s why the best sales planning processes start with a sales forecast. Sales forecasting helps you use the data and expertise you have to predict where you’re going to go, allowing you a better look into the future and giving you a stronger understanding of what you need to do to empower those objectives. When used correctly, a sales forecast offers you a roadmap that can enable your team, align your sales and operations planning (S&OP) processes and catapult your entire organisation forward.

Read on to discover the best way to integrate forecasting into your sales and business plans. 

What Is Sales Forecasting?

Sales forecasting combines historical sales data with market projections and industry insight to predict what your salespeople will sell in a given week, month, quarter or year. It helps you set goals, improve your sales budgeting and know when to hire, while also offering you a view into potential issues that may affect your sales projections. In turn, it empowers you with the information you need to try to get ahead of them.

But to get the most out of your sales forecasting, you need to draw on the right data and ensure your forecast is as accurate as possible. You also need to align your sales team based on the results so that everyone knows where they’re going—and doesn’t end up somewhere else instead.

So how do you go about doing that? And more importantly, how do you make sure you get it right?

4 Steps To Preparing an Accurate Sales Forecast

Creating a solid sales forecast isn’t always the easiest of tasks. But the best strategic sales plan examples will get your sales and operations teams where they need to be. Which means making sure your sales forecast is as accurate as possible is critical to the success of the sales planning process. 

To make sure yours hits the mark, follow these steps:

1. Formalize your sales process

Building a formalised sales process helps ensure everyone is on the same page, with a baseline in place to ensure everyone on your team better understands the entire sales journey. This includes the steps your buyers take towards their final sale, knowing what it takes for a prospect to move from one stage to the next and making sure everyone is working with all of the same definitions along the way. That all may sound obvious, but you’d be surprised how many companies have a sales process without a clearly defined exit criteria to move them from one stage to the next. 

To formalise your sales process, then, start by establishing a better understanding of your process as it already exists. How long (on average) does it take to close a deal? How much time do prospective customers stay at each stage? How do other teams, such as marketing and operations, contribute to your sales goals? Creating a single source of truth will create better transparency and help you understand the sales journey more clearly, while letting you determine the level of support you should be offering throughout the sales process.

Only with this understanding in place can you start predicting how future buyers are going to move through your sales cycle—and plan for how your sales team can help them at every step.

2. Consider the data

By looking at historical sales data such as your conversion rates, average contract value and sales activity data—among other metrics—you’ll be able to get a better idea of what a typical sales cycle looks like in your organisation and how individual members of your team contribute towards it. This data will help inform the forecasting process. Meanwhile, the data you have available will also influence the forecasting method you choose to use (more on that later) and determine whether you can use tools such as predictive analytics to help with your predictions.

But your sales history shouldn’t be the only data that factors into your planning—at least not if you want your forecast to be as accurate as possible. Market and industry shifts will also come into play, as will the revenue targets you’re hoping to accomplish. Your sales planning could be affected if your competitor releases a new product, for instance, or if the economy shifts. You may also need to accommodate for sales slowdowns,  take a different approach if there have been regulatory changes that affect your particular market or hire new sales representatives if you’re going after significantly higher revenue targets than in the past. It’s important to keep on top of those types of influences in order to get a fuller picture of where your sales may go.

3. Set quotas

The next step to building a sales forecast is to start putting all of that data to work, building out quotas for each member of your team—giving them set goals to work by and creating a baseline to use as a comparison in your sales forecast. 

Quotas are usually derived from historical data and top-level revenue targets, but don’t just look at that data in aggregate. There are often natural trends in sales performance throughout the year, including regular, slow or busy periods that may change by region. When you’re creating your quarterly or monthly quotas, then, keep in mind those natural peaks and valleys and how they might contribute to your individual and company goals. Also consider operations-level data and the trends it reveals on territory and segment performance, merging that with top-level targets to spread your ultimate goals appropriately.

4. Determine the best forecasting method(s) for you

How you approach your sales forecasting will depend on a variety of factors, from the size of your sales team and maturity of your business and forecasting capabilities, to the data you have available to you. We’ll go over the most popular methods available in the next section, but getting the most out of your forecasting efforts may mean using more than one to inform your future goals.

Whatever the case, once you choose the best method(s) for your business and start the sales forecasting process, you’ve still got more to do. Ensuring accuracy means continually evolving that process and making sure you're pulling on the best data to get to the best results. 

Achieving success also means keeping your entire team in the loop—using your forecasting efforts to inform the feedback you give them and keeping them accountable to your overall goals. By bringing in the entire sales and operations team, you’ll make sure you have the support you need to meet those goals—and put everyone on the path towards them.

Sales Forecasting Methods

As already mentioned, there are a variety of sales forecasting methods you can choose from to help support your sales planning efforts. Read on to learn about three of the most popular approaches.

Qualitative Forecasting Methods

Like the name suggests, qualitative forecasting methods rely on qualitative data—that is, observations, experience and instinct-led insights—as opposed to quantitative data that’s more numbers based. This kind of forecasting draws on the expertise of experienced managers and consultants as well as other sources such as customer survey results.

Qualitative forecasting can be used when you don’t have a lot of reliable data to work with, and/or can supplement the data you do have to account for market, product, regulatory or industry changes you know will change your sales forecast but aren’t able to quantify. It gives you the flexibility to look at areas of your sales plan where numbers may not exist.

This type of forecasting requires experienced team members or consultants that are able to use that experience to predict customer behaviours and patterns ahead. Just be aware: since it’s based largely on personal perspective, there may be blindspots you don’t recognize until too late. It’s important to understand where those biases may exist.

Time Series Forecasting

While qualitative forecasting is less reliant on hard data, time series forecasting—a popular type of quantitative forecasting—requires years’ worth of it for the most accurate results. By drawing on a wealth of historical data, it allows you to better understand past performance and how sales performance is changing.

By examining that data over time, time series forecasting lets you see any patterns or trends that may exist: for example, the effects of sales promotions, seasonal differences, changing growth rates and so on. With the assumption that those patterns and trends are likely to repeat themselves in the future, this information can help fuel your sales forecast and allow you to be better prepared for what’s ahead. Where this type of forecasting sometimes falters, though, is when your market or business environment changes and historical data no longer applies in the same way.

Causal Forecasting Models

An even more sophisticated method of forecasting, causal models rely on a combination of data and analysis to identify the causal relationships that exist in your sales pipeline. Causal forecasting may incorporate sales data, market surveys and even the data from your time series analysis to forecast future results.

By assuming a cause-and-effect relationship between independent variables, causal forecasting looks at all of the factors that may have an impact on future outcomes to predict future sales scenarios. Effective for both short- and medium-term forecasting, it can work well alongside what-if style analysis, but requires a large amount of data if you’re going to get effective results. This type of forecasting also depends on consistent relationships between the variables you look at—if those relationships change, causal forecasting becomes less effective.

Integrating Forecasting Into Your S&OP 

Sales forecasting is just the start, though. To put it to work successfully and truly enable your entire team towards the goals you’re setting, you need to integrate that forecasting into your S&OP process. 

S&OP incorporates all parts of your business, for a big picture view of your entire operation— including marketing, finance and operations. By extending your sales planning through the entire process, you remove any departmental silos and get every team working towards your goals. After all, your sales forecast isn’t much use if you don’t have the internal infrastructure in place to achieve those objectives. You need marketing leads, inventory for your team to sell and the reps available to onboard your new customers. That takes a team effort.

Your sales forecast is the first step to building that S&OP roadmap, coordinating your future sales projections with the rest of your organisation and putting each department on the path towards them. And it’s an important step—one that can lead to increased profits, better customer service, quicker response times and more. 

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Tanya Goncalves

Tanya Goncalves

Tanya Goncalves is a brand leader and marketing trailblazer who has an interest in refreshing brands through content creation. As the Content Marketing Manager at Vena, she often innovates and develops new ways to build brand recognition through interesting campaigns and creative content.

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