Sales forecast: the art of formulating optimal sales forecasts

It seems that sales teams don't play dice. And yet, every year (or more frequently) they are asked to make random predictions...

It's a fact: sales forecasts are all too often a matter of magic (at best), or pure chance (at worst). Yet many departments and managers rely on these sales and cost forecasts to develop their strategies and distribute their budgets. Not to mention the operational impact on sales performance. Enough to give managers a headache.

Good news: it doesn't have to be this way! It is possible to formulate accurate sales forecasts by taking into account relevant data - visibility of opportunities using a pipe review tool, qualified leads, expense management, etc. - and to produce a convincing forecast, with realistic objectives within it. The result is a convincing forecast, with realistic objectives.

It's a way for sales teams to stop guessing and optimize the management of their sales processes. Provided they have the right forecasting methods... and the right tools!

What is a commercial forecast?

What company doesn't need to look to the future? Large or small, every organization needs to formulate a sales forecast to guarantee informed decision-making and ensure its long-term survival. This is what forecasting is all about, or the art of producing accurate sales forecasts.

A definition of the sales forecast

Asales forecast is an exercise in predicting future sales. We could call it "forecasting" for simplicity's sake, but the expression has become part of everyday sales talk.

These forecasts are obviously not based on hot air. They take into account various indicators such as the salesperson's pipeline or the length of the sales cycle. A more elaborate version, the rolling forecast (takes the form of a rolling forecast. The aim? To have a continuous, optimal view of each team's sales forecast.

Why forecast?

With this document, the company can estimate its sales and set its budget for the following year. For its part, the sales team uses it to set its sales targets for the coming period. It is therefore a decision-making tool, a pillar of operational management and a sales performance lever.

Basically,acommercial forecast allows you to...

- Anticipate demand and market trends, so optimize sales planning.

- Find new opportunities.

- Better control of expenses.

- Identify potential problems, using a sophisticated sales forecasting model.

- Evaluate performance (by comparing predictions with actual results) to set more consistent targets.

- Boost the sales process.

- Guide the company's development (ideal when planning to conquer a new market).

What are the sales forecasting methods?

One thing is certain: good sales forecasts must be based on well-honed methods. Which ones should you use to produceasales forecast?

Qualitative methods

A qualitative study takes into account forecasts based on human judgment and the study of behavior. This is known asintuitive forecasting when sales people are asked to produce their own forecasts, but other departments (particularly the marketing team) can also be involved. Precision may be lacking, but the data derived from it is often useful.

Quantitative methods

These sales forecasting methods are based on mathematical formulas and historical and/or current data, such as actual sales performance. This forecasting model is distinguished by its high degree of accuracy, but requires the updating of its frame of reference to derive relevant information. Quantitative analysis can take several forms:

- The historical data method (historical forecasting) consists of integrating data from previous periods, adding a sales growth coefficient to better reflect the market.

- Rolling forecasts constantly adapt their reference period to take account of market developments, which distinguishes this approach from the classic forecasting plan. The implementation of rolling forecast reinforces a company's resilience and ability to seize opportunities.

- Time-series analysis is used to make forecasts, incorporating not only future sales, but also future expenditure on inventory and order management, the supply chain, and so on.

- The forecasting method with key performance indicators (KPI) consists in analyzing various signals to obtain specific information. For example: thewin rate at each stage of the sales cycle, the number of opportunities signed over the same period, the average length of the sales cycle, the conversion rate per stage, seasonality, etc. The advantage? Each company can refine its sales forecasting method using its own key indicators.

Forecasting tools

Qualitative or quantitative model, classic approach or rolling forecasting None of this would be possible without the right tools. Those that capture the relevant data, especially from primary sources - information collected directly from prospects, customers and stakeholders, in order to predict their future behavior.

The best-known and most widely used is CRM (Salesforce, does that ring a bell?). Customer relationship management software, essential for recording, tracking and analyzing interactions between the company and its users - and seizing every business opportunity. Then there's the classic among classics: the good old Excel spreadsheet, now more common in its collaborative form ( Google Sheet on Drive), a perfect tool for creating dynamic dashboards and visualizing data. There are also more innovative solutions, such as predictive analysis tools that literally read the future of a given market or sector, and anticipate a company's sales and/or turnover (examples: Adobe Analytics or Sinequa).

Finally, there are complementary tools that don't make forecasts, but optimize sales forecasts thanks to hyper-pointed insights. Such is the case with Modjo, a conversational intelligence technology that uses AI to extract relevant data from conversations between sales teams and customers. The result is greater productivity and strategic efficiency, thanks to summaries generated in the blink of an eye and automated input into the CRM.

As you'd expect, it's the complementarity of these methods and tools that helps produce an optimal sales forecast. But make sure you have concrete, usable data at your disposal! The more accurate the information you have at your disposal, the more accurate your sales forecasts will be.

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