Sales forecasting in digital sales – better sales thanks to data

How revenue forecasting helps improve digital sales

Theory and practice are not always congruent. In reality, things regularly turn out quite differently than expected. This is particularly true for sales – especially for the preparation of sales forecasts.

In an ideal world, team leaders work with complete, comprehensive, and up-to-date data on all leads in the pipeline. They also have a deeper understanding of historical sales trends, know market conditions, and have an eye on all external factors that potentially impact sales. In this perfect world, the knowledge and data are then analyzed using modern technology to achieve accurate forecasts for future sales. (more on “Data-Driven Decisions“)

A nice scenario, but the reality is different: The world is not ideal – and processes like the one described are rare. As a rule, not every employee keeps his or her data up to date, and the team leader does not always keep an eye on trends and new developments in the market. Ergo, you will rarely start your day-to-day work with spot-on data sets. Sales processes vary constantly, and tools for sales forecasting are rarely flexible enough to adapt to the hardly predictable circumstances.

Yet despite these imponderables, sales forecasts are a fundamental part of sales – in small startups as well as in medium-sized or large companies. Are all these companies now tilting at windmills? No. Fortunately, digital advancements in the form of ERP, CRM and forecasting tools, along with a few tricks of the trade, can greatly simplify the process from raw data set to finished sales forecast:

1. Top-down communication is out of date.

In today’s world, a central role falls to the team in each department. Top-down approaches – the supervisor makes specifications that the employee fulfills – have long been outdated. But how does each individual in the team work reliably and continuously? After all, sales also includes manual (and often dry) administrative tasks – such as archiving and filing data. Tasks that may not always be fun, but are indispensable for a functioning daily work routine.

To increase employees’ motivation to do the dry administrative work (and thus the likelihood that they will stick to it), it is important that colleagues understand sales procedures and processes. To do this, employees must be aware of the value and idea behind these procedures. The why is as important as the what and the why these days.

Team leaders must communicate this appropriately in their expectations and specifications for the team. The key question for them is: Am I really sure that my employees understand how important these processes actually are?

2. Sales forecasts are everyone’s problem

But what is the most effective way to make employees understand the relevance of administrative tasks and the importance of timely and accurate input? The solution is to integrate them into the forecasting process. Sales forecasting thus becomes a problem for the entire team. When employees experience firsthand the problems of inaccurate sales forecast data, it increases their motivation to complete administrative tasks on time and with care.

3. Managers lead by example

It’s actually a given, but it can’t be repeated often enough: Managers must lead by example. Many sales managers themselves do not hold themselves to the high standards they set for their team. It’s no wonder that such a poor role model quickly lowers the diligence and care of the entire team. However, if the boss himself always enters his data punctually and carefully, he motivates the team to follow his example.

4. Not only internal data counts – external factors must be taken into account

Once the administrative tasks are done consistently and carefully, the focus turns to the data sets. They are the basis of the forecast or “insights.” But that’s all: after all, sales are complex. In the end, it is not only the information provided by employees about deals, leads and the like that has an impact on sales, but also numerous external factors independent of the internal data. These factors need to be researched, analyzed and incorporated into the sales forecast. Basically, keep in mind as many external factors as possible, the following are the minimum:

  • The company’s previous conversion rates
  • Seasonal differences in sales
  • Any current trends in sales
  • Current developments in the company’s own industry
  • Shifts in the global economy
  • One’s own launch schedule
  • One’s own marketing plans
  • Vacation periods and vacations

5. Digital tools support the sales forecast

Next, the collected data (internal and external) is analyzed and understood – the sales forecast is created. Digitization and the development of various digital tools offer the opportunity to simplify and speed up this creation process.

CRM software offers several advantages for the conception of sales forecasts and supports the responsible person with important information for the calculation of sales. Time sequences can be determined more precisely in this way – for example, which deals will be closed next, in which time period the individual sales processes will reach the next step, or even which deals have the greatest value. Modern tools can capture and analyze this data within seconds and calculate probabilities that users can use to forecast sales.

Generally, the more data available, the more accurate the forecast. In this way, sales managers can see within a short time how much revenue has already been generated, how much is still being generated, and where the team and sales are lacking.

6. Flexibility of the software is an important factor

As mentioned, numerous imponderables in sales have a short-term impact on sales forecasts. Therefore, flexibility and adaptability are important requirements for forecasting tools. Rigid forecasting tools are only an effective tool as long as products are paid for directly upon delivery. But as mentioned at the beginning, theory and practice are rarely coherent and different payment periods, call-off quantities and deadlines are commonplace in sales. As a result, a lot of extra work is often required to add the period between sales closing and payment into the forecast. With flexible and customizable tools, such factors can be more easily factored in and included in the forecast.

7. Thinking outside the box

However, many CRM-based forecasting tools do more than just add flexibility. They also provide sales managers with an overview of current and future sales. That’s because CRM tools are also where salespeople store information about their current sales processes, deals and leads. At the click of a mouse, team leaders can thus switch between the pipelines of their employees and thus identify dead ends or problems, for example, and respond to their employees in good time. Solution-oriented and efficient work is facilitated and helps to increase current and future sales.

8. View data from different angles

The clarity that CRM and forecasting tools provide also helps in viewing the data from different perspectives. Filter functions play an important role in this. Typical filters are the start of the deal or the salesperson responsible for the lead. In some cases, such filters provide information about whether future revenue can be expected from deals that have been on hold in the past. Sometimes the causes of forecasting problems turn out to be frighteningly simple: for example, if a key salesperson is on vacation for a certain period of time and his deals therefore do not materialize until the next quarter.

    Timo Rein ist Gründer und Geschäftsführer der Sales-Pipeline-Software Pipedrive. Nach einem erfolgreichen Psychologie-Studium gründete Timo Rein zunächst eine Beratungsfirma für Vertriebsteams.

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