Gazing into the future while dreaming about all the leads that are going to breeze into your pipeline may be an effective motivator, but the truth is your sales team needs hard numbers to keep the grind on.
Sales forecasting is the process of pulling up historical data on your sales and leads generated and then crunching these numbers into intelligent reports that give your sales team realistic targets to go after.
Why Forecasting Can Be A Pain….But You Should Still Do It Anyway
Undue enthusiasm about your sales quarters will lead to disappointing returns. Creating a Sales Forecast will tell you how to allocate your advertising budget for maximum returns and will also give you a clear idea of the expected conversions of leads along the various stages of your pipeline.
A Sales Forecasting Strategy That Doesn’t Suck
Sales forecasting is a fundamental cog in your revenue generation machine and can help you make better decisions on your financial future.
However, sales forecasting methods depend on the data you have of your previous quarters. While established companies may have all the information they need to predict sales, brand new companies with limited market exposure may have to go about the trial and error forecasting method until they have a steady stream of leads and conversions.
3 Steps to Designing a Sales Forecasting Strategy That Companies of Any Size Can Implement
STEP #1 – Outline the stages of your pipeline
The leads entering your funnel go through different stages. For example, while you generate a good prospect, you first need to reach the decision maker. You then need to send out a contract to close the deal.
In such a case your sales pipeline would have the following parts in its funnel.
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STEP #2 – Look at Historical data of deal conversions and assign a possible closure percentage to each stage of the Deal
Looking at your conversions, maybe you found that 35% of your leads converted into interested prospects. As you moved further down your pipeline, you find that around 25% of them ask you to send across a contract or an invoice. Further down you notice that only 25% of these interested prospects showed enough faith in your team to make a purchase.
An example of this would look like;
STEP # 3 Assign an expected closure date to each prospect
Pull out an excel sheet and divide your financial year into four quarters. In each quarter you make a table that has the following rows;
1 – COMPANY NAME
2 – DEAL STAGE
3 – EXPECTED CLOSURE
4 – NEXT STEPS
The expected closure should be a date by which your team intends to close said prospect.
Putting These Steps to Work
Now that you have your excel sheet, begin tracking leads in these columns, If a lead is interested, update the sheet and mention which stage of your pipeline the lead is currently in.
As you continue this process, use the following excel sheet formula to predict the revenue you can generate based on your pipeline by entering this formula into the deal conversion probability column of your sheet.
EXCEL SHEET FORMULA TO CALCULATE CONVERSION PROBABILITY – =IF(C23=”Contacted”,0.15,IF(C23=”Decision Maker Bought In”,0.35,IF(C23=”Contract Sent”,0.8,IF(C23=”Closed – Lost”,0,IF(C23=”Closed – Won”,1)))))
What this does is, each time you update the lead status, your conversion probability formula auto calculates the permutations of the lead converting based on your historical conversion data.
With the help of Sales Forecasts, you can
1 – Get a bird’s eye view of the possible conversions you can expect based on expected deal closures
2 – Help your marketing team plan your lead generation campaigns to tailor it to your revenue goals
3 – Give your sales team a quarter specific report on the targets they are expected to achieve
Predicting the future may be a lost cause, but you can visualize your ideal path with sales forecasting. Companies may find it difficult to implement these strategies without having marketing and sales departments working hand-in-hand to generate these reports. Sales CRM can help you drastically increase the productivity of these teams by automatically crunching your data to give you sales forecasts about your future.
It can give your reports on expected deal closure dates, Lead activity reports, individual sales team performance reports and much more. Kapture Sales CRM has been consistently helping companies hit their revenue goals and in most cases see a 20% increase in revenue in just 6 months.