3 Ways Generative AI Will Help Marketers Connect With Customers
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Building a sales forecast is both an art and a science. Accurate sales forecasts keep your leaders happy and your business healthy. In this guide, we’ll explain everything you need to know about sales forecasting — so you can get a clear picture of your company’s projected sales and keep everyone’s expectations on track.
We’ve organized this reference guide by the top questions sales teams have about the sales forecasting process, based on our internal conversations and more than 20 years of experience developing sales solutions.
Use the real-time data updates and insights of Sales Cloud to keep your forecasts accurate and your teams on track to hit targets.
If you’re a sales leader who’s already well-versed in the who and what of sales forecasts, skip to the sections on designing a sales forecasting plan and tools to improve sales forecasts for more relevant knowledge. Sales forecasting can become especially tough when we face an unexpected turn of events, so head to the section on what happens to sales forecasts in unpredictable times for more on that.
A sales forecast is an expression of expected sales revenue. A sales forecast estimates how much your company plans to sell within a certain time period (like quarter or year). The best sales forecasts do this with a high degree of accuracy, and they’re only as accurate as the data that fuels them.
A strong data culture is at the heart of an accurate sales forecast. This means all sales data is available to everyone at the company, and all teams do their part in keeping it updated, leaning on AI and automation to help. More on that in the section on tools used to forecast sales revenue.
All sales forecasts answer two key questions:
Coming up with those two sales projections is no easy feat. So sales teams factor in the important ingredients of who, what, where, why, and how to make their forecasts:
Forecasting lets leaders set realistic sales targets, create attainable and motivating quotas for sales reps, and gauge expected revenue, aiding in budgeting and spending decisions for the whole company. If forecasts are inaccurate, businesses may overspend (putting themselves in a risky spot), and set unreachable quotas (which is demoralizing for reps).
To understand why sales forecasting is so important to business health, think about two example scenarios: one with a car manufacturer and another with an e-commerce shop.
In the case of a car manufacturer, cars take a long time to build. The manufacturer has a complex supply chain to ensure every car part is available exactly when they need to build cars, so the number of cars available to purchase will meet demand.
When you buy something online, whether that’s from a large marketplace or a small boutique, you get a delivery estimate. If your delivery comes a day or a week after it’s promised, that’ll affect your satisfaction with the company — and decrease your willingness to want to do business with them again.
Sales forecasting is similar in both cases. Sales forecasts help the entire business plan resources to ship products, pay for marketing, hire employees, and beyond. Accurate sales forecasting yields a well-oiled machine that meets customer demand, both today and in the future. And internally on sales teams, sales revenue that delivers in its estimated time period keeps leaders and collaborators happy, just like a shipment that arrives on time.
If forecasts are off, the company faces challenges that affect everything from pricing to product delivery to the end user. Meanwhile, if forecasts are on point and sales quotas are met, the company can make better investments, perhaps hiring 20 new developers instead of 10, or building a much-needed new sales office in a prime new territory.
Each organization has its own sales forecast owners. These are some of the teams who are usually responsible:
No matter how a company calculates its sales forecasts, the process should be transparent. And at the end of the day, sales leadership has to be responsible to call a number. Whether met, exceeded, or missed, the forecast responsibility falls on them.
Sales forecasts touch virtually all departments in a business. For example, the finance department uses sales forecasts to decide how to make annual and quarterly investments. Product leaders use them to plan demand for new products. And the HR department uses forecasts to align recruiting needs to where the business is going.
At some level, sales forecasting affects everyone in the company.
The main objective of sales forecasting is to paint an accurate picture of expected sales. Leaders are looking to these numbers when they’re building out their operational roadmap and budget. If they’re confident in the projected growth, they can get to planning.
They could decide to staff more customer service touchpoints, fund more external marketing events, or invest more in the community. They could get ahead of purchasing new equipment or upgrades that get more expensive the longer they wait. Without a sales forecast, leaders are making critical spending decisions in the dark. If sales don’t go as planned, it could lead to cutting workforce, reducing support, or halting product development.
Sales forecasting is a muscle, not an item to check off your to-do list. While you should absolutely design a framework for your sales forecasting plan each year, you should also change up your strategies from time to time so new muscles develop.
Craft a sales forecasting plan with your team by focusing on three primary activities:
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Unpredictable events have an enormous impact on your sales forecast. Extreme weather or economic crises all dramatically change your forecast. What you thought you knew about expected revenue growth can be suddenly flipped on its head.
As soon as an extraordinary event hits, sales and finance leaders at your company will quickly want to know:
Your forecast implicates resourcing, headcount, and more (see the section on sales forecasting objectives). So although things may be changing quickly, you don’t want to give up on your forecast.
Rather than attempt to recalculate your forecast based on dubious estimates or conjecture, your best bet is to rely on a CRM solution to get an accurate view of deal status and pipeline in real time.
During a crisis, reps need to feed their CRM with data as events unfold so leaders have clear visibility into the rapidly evolving pipe. That data enables those leaders to support their reps with corporate-level decisions about where they should be focusing their time — and craft the new forecasts. Your forecast is only as good as the data coming into it from your sales teams.
In uncertain times, quick access to sales data and the ability to pivot sales territory and resource deployment accordingly can make the difference between business continuity and dissolution. There’s no silver bullet to forecast perfectly in a crisis or unforeseen scenario. But vigilantly updating what’s in the pipeline and analyzing sales data more frequently than usual will help you see trends and retool your forecast accordingly.
Empathy and care are always fundamental, but this is especially true in these situations. Empathizing with your customers’ challenges and caring for your own sales reps should come before anything else. Build trust with internal and external partners. That trust will help you grow again in the future. Learn more about maintaining customer relationships as a sales leader.
Only 45% of sales leaders are confident in their organization’s sales forecasts, according to Gartner. While it’s natural for sales reps to bring in some intuition to their sales forecasts, that’s where room for error can creep in.
This brings us back to embracing a strong data culture. To get a more accurate forecast, everyone in the sales cycle — from reps to managers to execs — should have a stake in making sure those numbers reflect the latest reality. Reps can keep all prospect info up to date, managers can track pipeline progress, and leaders can review how all teams are tracking toward those forecast numbers, with AI playing backup to spot any inaccuracies or chances to adjust along the way.
A CRM gives sales leaders a real-time view into their entire team’s forecast. The tool forecasts revenue by giving you:
A forecast is based on the gross rollup of a set of opportunities. You can think of a forecast as a rollup of currency or quantity against a set of dimensions: owner, time, forecast categories, product family, and territory. You can collaborate on forecasts with all the necessary people to see how opportunities are stacking up. Drill down into opportunities by sales leader, operating unit, manager, and individuals.
We also love a CRM with reports and dashboards. These highlight where the business challenges are, in plain and simple terms. It could be that four of five selling teams are at the right growth rate, and we just need to focus on another one. It could be that a certain product is challenged. The data opens up new doors to grow sales and see what could be working more effectively.
Another thing that’s great about a CRM is the guidance from AI. An AI for sales tool offers a neutral perspective on what’s actually happening in sales. For example, AI might note that an opportunity has been pushed out three quarters in a row — a finding that would’ve taken an individual reviewing the data longer to discover. Think of AI as your personal data scientist, taking your forecasting and entire sales operations to a new level.
Predictive AI tools take a look at historical sales data to give you a glimpse of what you might expect in the future. The AI will analyze factors like win rate or number of customer meetings. It takes some of the guesswork out of sales forecasting and helps you get to more accurate numbers. Try to analyze sales data for at least 12 months. Otherwise, there may not be enough data to get accurate sales predictions.
Sales forecasting is significantly more accurate when using a CRM instead of a spreadsheet. When a company is just starting out, sales teams usually rely on spreadsheets or back-of-the-napkin ways to calculate their sales forecasts. This may work for a while, but eventually, you’ll find this doesn’t scale.
The reality is, selling is more complex than ever. It involves everything from how demand generation campaigns are performing to how your phone calls to prospects are landing. The more you want to sell, the more you’ll want to rely on a CRM.
The secret to an accurate forecast? Reliable, well-maintained pipelines. See how we manage both efficiently (with the help of the right technology), and use our best practices in your business.
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