Most sales and revenue leaders believe that sales forecasts serve as a great counter-thesis to gut feelings, especially when it comes to shaping business plans and strategies. However, most leaders will also admit that their forecasts are far from perfect.
In the wake of the recent economic volatility and market uncertainty, sales leaders are prioritizing predictable revenue over growth.
Sales and revenue teams might be tempted to turn their back on forecasting. But now, more so than ever, there’s a need to invest in the right technology, to reforecast as little as possible.
In this article, we shed light on why sales leaders need a refreshed approach to sales forecasting for sustainable revenue growth in 2023 and how they can use new technologies to generate better, more accurate sales forecasts.
What are the common year-end sales forecasting challenges companies face?
End-of-the year sales forecasting often turns out to be chaotic as the company rushes to close last-minute wins and meet revenue goals.
Amidst this chaos, there’s a huge discrepancy between sales forecasts and actuals.
Why the trouble with forecasting? Here are the compelling explanations.
Lack of alignment between sales and finance teams.
For sales teams to act as catalysts for growth and profitability, they need high-quality data and analysis. Yet, too often, there is a disconnect between what is included in the sales forecast and the key pillars of the business strategy.
In order to gain better insights necessary for effective decision-making, sales must partner with finance and FP&A departments.
Rather than only reporting periodic sales figures, FP&A can educate sales team members on data gathering and analysis so that they become better informed prior to engaging with existing and prospective customers.
Improving collaboration between sales, finance and FP&A enables the organization to reach its stated objectives.
Using out-of-date or stale data to build sales forecasts
The difference between success and failure lies in the quality of data available to sales teams who then convert this data into actionable insights for sales leaders. Stale data is a result of manual data collection, when reports are built from extracts or dumps of data. This data is hard to utilize, since modern leaders rely on real-time data for quick and impactful decisions.
It is therefore critical to improve the way a company gathers and uses sales activity data in the end-of-the-year sales capacity planning, budgeting, and forecasting process.
Gaining access to high-quality data for accurate revenue and sales forecasts requires you to match sales resources with changing opportunities and business objectives. By integrating timely and accurate information about the organization and the industry, sales can glean insights into the changing customer behavior. This in turn leads to smarter pitches, shortened sales cycles, and improved effectiveness of the sales team.
Failing to factor in the attrition rate and ramp up time
HubSpot estimates the average sales rep turnover to be 35% which is higher than the average for all other industries at 13%. While employees leave even the best of businesses, sales teams tend to change organizations at a more frequent pace than others. It is imperative that you have a firm grasp on your attrition rate as it has a significant impact on your sales capacity planning and forecasting.
Also, when a member of the sales team leaves, it causes a multi-month ripple effect. Unfortunately, it is difficult to quantify the true impact of both hiring and losing sales team players.
The same implies the ramp-up time. While the industry average is three months, it varies greatly between newly hired sales folks and experienced professionals. Underestimating or overestimating the ramp up time affects the top and bottom-line revenue and the overall sales planning process.
The most efficient sales teams foster a culture to nurture employees, they have clear promotion pathways, and clear channels of communication rather than having a high-pressure culture that leads to burnout.
When you’re planning the sales forecasts, factor in the needs of the team.
Decisions made in vacuum
A PwC study revealed that more than 55% of companies work in silos, with each function making its own decisions, which led to stunting growth opportunities and slowing the pace of change.
The common problems associated with siloed are: unaligned teams, reduced accountability, and diluted company vision.
Putting it under the lens of sales forecasts, the question is: how could your sales teams meet the goals derived from decisions made in vacuum?
A collaborative planning process can reduce decisions made in silos. An integrated business planning software adds visibility to cross-departmental decisions and assumptions can be easily challenged and changed. When you can understand the “why” behind the decisions, you are more likely to make decisions that benefit not only from the current state but also the future of your team.
The implications of missing sales forecasts are far-reaching and disruptive, and sales leaders can remedy much of their forecasting woes with technology.
Fixing sales forecasting with the right software to consolidate data points
The onus lies on sales and revenue leaders to set the company up for success with accurate sales forecasts.
At fast-scaling companies, Pigment, a flexible business planning platform can speed up your company’s growth by automating redundant and time-consuming tasks in the sales forecasting process.
- Imagine a scenario where the sales team does not have to create a new spreadsheet for each rep or run calculations across tabs and sheets.
- Or when revenue teams can run comprehensive what-if scenarios in minutes, easily change assumptions and present forecasts in visually stunning reports.
- Or where RevOps teams can build, maintain, and change models across sales capacity, forecasts, and quotas.
Lastly, by allowing for cross-departmental collaboration, Pigment aligns the whole organization around shared goals and replaces chaos with efficiency. Multiple stakeholders can provide their input over a shared dashboard, run live conversations alongside the sales forecasting models, and improve planning and assumptions without having to create multiple versions of the plan.
Pigment’s integrations with Salesforce, HubSpot, Netsuite, and other data sources make it a great platform to consolidate all your data and model forecasts. The one-click scenarios feature lets you run best vs worst case what-if scenarios to address all possible future outcomes. Across the organization, it allows for data flow and updates changes into models via connected spreadsheets and presentations with a single click.
Sales forecasting acts as a tool for leaders to look at several scenarios and understand where in the range of outcomes the business impact lands.
The way forward: the roadmap to accurate sales forecasting in 2023
Clear and accessible data can help sales organizations get better at dealing with uncertainties
The truth is, in most companies, the availability of data is not a problem, accessibility is the biggest concern. When business information is not sourced, aggregated, or cleaned, teams end up spending more time on tasks that don’t add value and less on value-added strategic discussions.
Finance and sales leaders must set ground rules for data usage: what good data looks like, who owns it, who can access it, and beyond. RevOps, FP&A, and sales leaders must collaborate to ensure that employees at all levels are trained on using systems to collect, access, and maintain this data.
Moving sales teams closer to predictive analytics
While finance and data science collaboration is a trend that has recently started picking up, sales teams should start building working relationships with data science teams. Ideally, you would want a business planning platform to give you access to all business integrations for a smooth flow of information.
The benefits of sales and data science partnership are:
- The data science team can help you prioritize data sources.
- Help you source and cross-report on data from CRM and ERP.
- Help you make quick forecasts and rolling forecasts in case of unexpected use cases.
- Gain insights into product usage, customer demographics, and behavioral and activation data.
- Through churn/buy models, improve your headcount vs target accuracy.
Tip - Data teams regularly deal with raw data. You will have to optimally consume and visualize this data and present it in an easy-to-understand format to stakeholders or end-users.
Using a scenario analysis tool to address “what-if” scenarios
An important aspect of sales forecasting is to prepare for all eventualities using “what-if” scenarios. A scenario analysis tool is instrumental in addressing all potential bottlenecks.
By answering the “what-if” questions at the sales capacity planning level, you present costly surprises that could otherwise come up at the later stages of sales forecasting. The platform gives sales leaders the intelligence needed to avoid surprises and meet their needs.
If you’re looking to streamline your sales forecasting process using the right business planning software, book a personalized Pigment demo.