There are many sales forecasting benefits, and the specifics differ by industry, but in general the benefits you reap from adopting a sales forecasting practice apply across the board. Sales forecasting is a critical function for any organization that wants to achieve its sales goals. In fact, it is considered to be one of the most important activities a sales team should engage in. For those who have not read our Sales Forecasting Definition, Methods, Examples article, we will briefly cover the what and how, then dive into the why, the focus of this article.
What Is the Purpose of Forecasting?
As covered in our in-depth article on the requirements, different methods, and examples of sales forecasting, the purpose of sales forecasting is to estimate what future sales may look like at your company. While nobody has a crystal ball, accurate forecasting can be achieved provided you capture certain sales metrics, set sales goals, put a sales pipeline in place, and set up reporting.
How Does Sales Forecasting Work?
Typically, sales forecasting takes into account past sales data, the current sales pipeline, industry-specific opportunities and challenges, and of course, economic trends. Or should. There are also other factors that can help to forecast sales, for example, a company’s sales team and processes, including the technology it leverages to manage the sales cycle.
Why is Sales Forecasting Necessary?
One of the most important sales forecasting benefits is that it gives you a reign on your company’s financial success. It is key to creating your sales pipeline, pinpointing process gaps, identifying growth opportunities, making crucial business decisions, increasing business retention, and improving cash flow. It also provides insight into how one should manage your workforce, cash flow, and resources. What is there not to love about it?! So, let’s take a look at the Top 7 sales forecasting benefits:
Sales Forecasting Benefits
1. Execute on Your Strategy
Strategy is key to not just launching a company but its continued success. And sales forecasting is a precursor to the process, operations, and the resources required to turn strategy into reality. It provides you with realistic benchmarks and attainable goals. A sales process that you can translate into an effective and efficient sales pipeline. In other words, it helps you to both formulate and execute on your strategy.
2. Tailor Sales Planning to Your Industry – Sales Forecasting Benefits
Sales forecasting differs from industry to industry and, as we will demonstrate in this article, the construction industry is particularly unique in that regard. As a building contractor, you would need to base your forecasting on historical data, an opportunity and/or lead qualification scorecard, and a sales pipeline corresponding to your sales process or operations.
Most sales management tools like iDeal CRM provide forecasting reports that help you figure out where the opportunities are and who the clients are that provide you with more opportunities to increase your win rate. Sales forecasting also takes into account specifically what activities you need to perform in the construction industry to win work.
3. Smooth Out Sales Processes
A sales process can save you or sink you. Sales forecasting shows you where the opportunities and the gaps are in your sales process. How? It requires you to establish sales metrics and benchmarks. Forecasting does not happen in a vacuum. It is based on actual sales data, past and present. It also factors in, for example, the length of time it takes to turn a lead into a customer. Once you have the historical data at your fingertips, you can document your sales process. You can also build a sales pipeline based on that sales process. Now you can nail down the steps each prospect goes through from lead to client, and each opportunity goes through from new opportunity to the won project. This, in turn, eliminates bottlenecks and fills process gaps, i.e. smooths out the sales process.
4. Position Your Sales Team for Success – Sales Forecasting Benefits
Sales forecasting identifies strengths and weaknesses. As we mentioned before, it establishes benchmarks. Your sales team will readily adopt sales goals based on sales forecasting, because it is based on fact. It establishes ownership and therefore accountability. Now you can make your best sales moves with what you know about the playing field!
You will know how many sales professionals you need in the field, and how much you can afford to pay them. Sales forecasting that leverages historical data allows you to identify the main players and appoint them in key sales positions. Leadership qualities also become evident when you look at actual sales performance as part of the sales forecasting process. Your dream team is set for success.
5. Leverage Technology
Today, technology is key to sales. Here are a few examples of how forecasting technology can help advance your company:
- With the appropriate sales management system, you can set proper sales pipeline stages.
- You can also reach 100% sales pipeline visibility.
- Using technology to forecast will help you with setting team goals
Again, because the construction industry is unique, it is important to pick a sales management tool like iDeal CRM that is specifically developed for the building industry.
6. Leverage Demographics
Sales forecasting has to be mindful of what works where, something crucial to know for future success and continued profits. Where did you gain the most wins, was it on single housing or multi-housing projects? Should you bid on jobs in a certain geographic area or is it just not profitable? It will, amongst others, also illuminate the so-called 80-20 rule, in other words what the activities are that account for 80% of sales success at your organization.
7. Keep a Pulse on the Economy/Identify Revenue Dips Early On
Sales forecasting takes into account the economy and how it affects your specific industry. Of course, the economy cannot be forecast with 100% accuracy, but it can be factored into the analysis and future estimates. What’s more, it will allow you to swiftly make the necessary adjustments if you factor in the variables, e.g. fluctuating cost of construction materials, when you forecast sales.
Software Can Help You Reap the Full Benefits of Forecasting
The appropriate software solution can make a bid difference in sales, forecasting, and reaching your revenue goals. For example, for iDeal CRM for Construction offers construction companies an all-in-one solution for sales management. Such a system will help organize and track opportunities, clients, proposals, and bids. Keeping all your sales data in one place will also help your company generate accurate sales, forecasting, and pipeline reports. You can review iDeal CRM features and decide whether it would be a suitable solution for your organization. You can even register for a free account and see how a software solution can help with forecasting.
As you can see, sales forecasting is an integral part of the sales cycle at your organization. It provides you with a solid basis to:
- Analyze and assess past sales performance;
- Pick and position your sales team for success;
- Identify sales process strengths and gaps;
- Factor in economic trends that may impact your sales achievement;
- Establish technology needs that can make your sales process more profitable;
- Pinpoint what you need to deliver on your sales strategy; and
- Direct your sales efforts!
Read our how-to article on sales forecasting requirements, methods, tools, complete with examples to get your company started on your own sales forecasting journey!