Importance of Sales Forecasting: 6 Crucial Benefits
Wondering about the importance of sales forecasting?
In this guide, we go over the benefits of sales forecasting and help you get started with forecasting sales accurately.
1. Estimate future revenue
The main purpose of sales forecasting is to help businesses predict future sales performance. It allows companies to understand how much revenue they’re likely to generate in the next month, quarter, or year.
This, in turn, opens up opportunities for better decision-making, resource allocation, strategic planning, and more.
2. Make data-driven decisions
Creating a sales forecast allows you to make informed decisions for your business.
It can help you decide whether to launch new products, enter new markets, hire more staff, and more.
3. Allocate resources more effectively
Sales forecasting can also enable you to allocate resources more effectively across all your business’ functional areas, including:
- Inventory management – By predicting demand, sales forecasting helps you keep adequate inventory levels and prevents you from under- or over-stocking, both of which can be problematic for your bottom line.
- Hiring – An accurate sales forecast can help guide your hiring efforts and eliminate the risk of under- and over-staffing, helping you save on labor costs.
- Marketing – Predicting sales performance is also very useful for planning your marketing efforts and budget.
4. Improve goal-setting
Sales forecasting helps companies improve goal-setting so that they’re able to:
- Set realistic goals – Once you forecast sales, you can set realistic sales quotas for your team to reach.
- Improve team morale – By being able to set more realistic targets, you’ll help improve team morale and performance.
- Align organizational objectives – Sales forecasting can also help align organizational objectives (e.g., forecasting growth in a specific product segment can lead to allocating more resources to market and produce those products).
- Evaluate performance – A sales forecast can serve as a benchmark against which you can measure business performance. By comparing forecasted sales with actual performance, you can evaluate how well you’re meeting your business goals.
5. Plan for future growth
Understanding projected revenue is crucial for being able to plan for future growth. With an accurate sales forecast, you can be more confident when
- Identifying new opportunities – Analyzing trends in sales performance can help you uncover new opportunities for growth in the form of new markets you should target, products you should develop, and more.
- Guiding investment decisions – Understanding future sales performance is crucial for being able to make wise investment decisions to grow the business.
- Managing risk – A sales forecast is also useful for identifying and mitigating risks, such as a seasonal decrease in sales.
6. Motivate your team
With clear goals backed up by a sales forecast, sales leaders can give their team something specific to aim for.
Specific goals are much more likely to be accomplished — imagine asking your sales reps to close more sales this quarter vs. asking them to close 10% more revenue compared to the previous quarter.
When used this way, your sales forecast acts as a roadmap for your sales team and provides every sales rep with a sense of direction.
With accurate sales forecasting enabling you to set realistic goals, it also helps reduce your team’s stress since they’re not asked to achieve the impossible.
How to get started with sales forecasting
Ready to create your first sales forecast? Here’s how to do it:
- Choose a time period for your forecast – Start by choosing a time frame for your forecast (e.g., month or quarter).
- Gather your sales data – Collect all relevant past sales data from your CRM and other places.
- Select the right sales forecasting method – There are a lot of different sales forecasting methods out there (e.g., based on historical sales data, opportunity stage, etc.). Check out this guide to learn how to choose the right method for you.
- Create your forecast – Finally, create your sales forecast by using a spreadsheet, your CRM software, or a dedicated sales forecasting tool.
Improve your sales forecasting this year
There are two common sales forecasting challenges most businesses run into:
- Creating sales forecasts can be cumbersome and time-consuming.
- Most sales forecasts are highly inaccurate.
Luckily, sales pipeline management and sales forecasting software like Weflow can help you address both of these problems.
Weflow makes it easy to submit, review, and track changes to your sales forecasts. It includes features such as collaborative forecasting, waterfalls, and quarterly predictions.
Additionally, Weflow supports automated sales activity tracking, which ensures all relevant data ends up in your Salesforce CRM instance. This, in turn, helps you create more accurate sales forecasts.
Ready to start creating highly accurate sales forecasts with ease? Get started with Weflow for free today.
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