Put plainly, a sales forecast is a roadmap to the future. There isn’t any shortage of advantages to forecasting month-to-month sales.
Some benefits involve:
Improved Decision Making
If you know how your year, quarter, or month will play out, it is a lot easier to make decisions regarding both the immediate future of your company, as well as the bigger picture beyond.
Helps Procure Investors and Loans
If you want outside capital for your company – whether in the form of investors or loans – chances are they will ask to see your sales forecasts before they commit to giving you funds.
Your sales forecast shows an investor where you are, as well as where you are going.
Helps to Create Budgets
Your company should run inside a budget – and if you do not know what your expenses and revenue are, that becomes more of a challenge. Having a forecast shows how much revenue you predict to have coming in, making developing a budget a lot easier.
Shows the Health of your Sales Pipeline
The sales pipeline is critical to your company, and a forecast is going to require assessing all the business within the pipeline and projecting what is to come. It’s invaluable because it’ll allow you to witness where there are possible bottlenecks in the pipeline today, providing you a chance to correct them before they become detrimental.
Decreased Risk
One other method of using a forecast to help your business is by permitting you to decrease risk.
A forecast may lower risk. An accurate forecast spots deficiencies and weaknesses in revenue – enabling you to adjust or repair them and decrease your risk before those problems become a real issue.
Set Realistic Quotas
If you do not know how many sales you predict to generate, how can you have hopes of creating attainable and realistic team quotas? Here’s the simple answer: you can’t.
Research shows that around 66 percent of sellers are not hitting their sales targets. Does that mean they are all slackers? Does that mean you are awful at hiring sellers? In some instances, maybe – yet the larger problem is the sales targets themselves.
All too often, businesses set quotas based upon taking old figures and increasing them by a couple of percentage points. You should avoid doing that. Even the most successful businesses have valleys and peaks along their revenue timelines; therefore, assuming revenue is going to go up 5 percent each year and setting sales targets accordingly is a path to disappointment. It’ll get even worse if you have an unpredictable down year.
Having an accurate forecast makes setting sales quotas much easier – you’ll have an accurate idea of how much revenue you will make, and not a gut feeling. When you have this knowledge, it’s possible to set attainable, realistic sales team goals.
Those are merely a couple of the reasons to be sales forecasting. There are even more – therefore, now is the time to begin to consider how you can implement sales forecasting into your planning if you are not already.
Need help building a sales forecast? Contact Sales Leadership Coach Wesleyne Greer today at (281) 941-7272.