Re-posted from the Salesforce blog
Sales forecasting is both an art and a science. In my 20+ years of sales leadership, I’ve spent hundreds of hours thinking about sales forecasts. These forecasts answer two simple questions: how much do we plan to sell, and when will we deliver those numbers?
As hard as my team and I work on our forecasts, though, unpredictable events dramatically change them. Forecasting revenue has always been challenging, but the tremendous global challenge we’re all facing with COVID-19 has made it even more difficult.
Here, I share four sales forecasting truths that I wish I’d known sooner in my career. I hope they can help you approach your forecasting challenges in a more strategic way.
To help you better sell from home, our team has also created an in-depth Complete Guide to Sales Forecasting that goes beyond my quick tips here. It answers the most common questions I hear about sales forecasting from sales reps and leaders.
1. Your forecast can change in a flash
Extreme weather, economic crises, global pandemics like COVID-19 – all dramatically change your forecast. At times, what you thought you knew about expected revenue growth can be suddenly flipped on its head.
When that happens, it’s okay to put the forecast aside for a moment. First and foremost, I tell my sales leaders and reps to focus on empathy and relationships. That goes for how we treat one another internally, as well as how we treat our customers. I’ve learned that if you maintain customer relationships now, those relationships will help you grow again when it’s time.
Even though forecasting is tough in this environment, it’s also more important now than ever. The forecast is a critical resource to help everyone plan for the months and years ahead. As soon as an extraordinary event hits, sales and finance leaders at your company will quickly want to know:
- How’s our pipeline looking today?
- What are the best- and worst-case scenarios?
- How has the forecast changed from a week or a month ago?
You’ll want to slice and dice this data by region, leader (as shown in the next image), rep, product, and more. I’ve learned using the right tools in these high-stress moments takes some of the guesswork out of the equation. For example, our teams use powerful dashboards in Sales Cloud to have clear visibility into the rapidly evolving pipe. Reps need to double down on keeping all their data in Sales Cloud up to date, so leaders have as accurate of a view as possible. This helps your team know what’s happening now – and what’s likely to happen next. For more on building that prediction, see the next section.
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2. Sales forecasting should be based on five simple questions
When I first started in sales, I knew I needed to factor in plenty of variables in my forecasts. I also knew I needed to calculate how much and when. But I hadn’t yet tightened my lens around these five areas: who, what, where, why, and how. These five simple areas are what I now tell my teams to focus on when building their forecasts:
- Who: Sales teams should make their forecasts based on who their prospects actually are. Depending on if their prospects are the decision makers or just influencers, the forecast will be more or less exact.
- What: Forecasts should be based on exactly what solutions you plan to sell. In turn, that should be based on problems your prospects have voiced, which your company can uniquely solve.
- Where: Where is the buying decision made, and where will the actual products be used? Sales teams see better accuracy when they get closer (at least for a visit) to the center of the action.
- Why: Why is the prospect or existing customer considering new services from your company in the first place? Is there a big event making them consider it now? Without a forcing function, the deal may stall.
- How: How does this prospect make purchasing decisions? If you’re not accounting for how they’ve done it in the past, it may be fuzzy math.
Of course, in unpredictable times, some of these items are harder to get a read on than others. But it’s important to keep adjusting the data based on what’s happening in the field to try to get it right. A high-pressure scenario is not the time to give up on your forecast.
Some of these elements are plain facts, while others involve conjecture. The more you sell, the better you get at forecasts. That’s why they’re both an art and a science – it’s a balance of both.
You can also use your forecast to assess current risk to your business. Another way of saying this is negative forecasting. For example, one of our customers recently added a COVID-19 field in Salesforce and tagged deals with it, so they can see specifically how the pandemic impacts them. The two key benefits they’ve realized by doing this are:
- Prioritize deals involving a customer needing a product related to COVID-19, expediting the process to get those products to the customer faster.
- Track deals lost or pushed due to the crisis.
By doing negative forecasting to gauge risk, your forecast evolves as your business does.
3. Everyone in the company needs sales forecasts – not just the sales team
As I was starting out in sales, I knew I had to turn in accurate forecasts to make my sales leaders happy. Now that I’ve grown in my career and seen different phases of growth come and go, I’ve learned that every department relies on sales forecasts. There’s truly not a part of the organization that goes unaffected when forecasts are off.
For example, sales forecasts help the entire business plan resources to ship products, pay for marketing, and hire employees. With accurate forecasts, the company makes better investments, like hiring 20 new developers or opening a new sales office in a prime territory.
But if forecasts are off, the company faces challenges across all business functions, from pricing to product delivery to end users. Everyone relies on the sales organization’s ability to pull off an accurate forecast. So don’t underestimate the importance of your forecast. Even when things are rapidly changing, tweaking your guidance will help everyone make better decisions.
4. Today’s technology blows old-school forecasting methods out of the water
If only I had a glimpse back then of the technology I can access now. Today, sales leaders operate in a ridiculously sophisticated sales technology environment. The old back-of-the-napkin tricks and even the most confident sales rep can’t hold a candle to today’s sales forecasting tech.
For example, in our own internal deployment of Sales Cloud, we forecast revenue by:
- Monitoring our entire business with a complete view of the total pipeline.
- Tracking of our top performers. We look at which reps are on track to beat their targets with up-to-the-minute leaderboards.
- Forecasting for complex sales teams. Overlay Splits allows us to credit the right amounts to sales overlays, by revenue, contract value, and more.
We also use artificial intelligence (AI) to make our forecasts more accurate with machine learning. In the early moments of an unpredictable scenario like COVID-19, AI isn’t as helpful for forecasting sales, because its modeling is based on finding trends in past events. But scientists are already finding brilliant ways to use AI to help people in the pandemic.
As new developments surface, I’m confident we’ll start seeing AI helping sales teams again in new ways.
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These learnings are just the beginning of the sales forecasting insights we’ve collected. We compiled our best in our deep-dive article, the Complete Guide to Building a Sales Forecast. Read proven tips, get helpful calculations, and learn how technology plays a role.