5 Key Reasons To Use Sales Forecasts

Sales managers depend greatly on the information provided by accurate  sales forecasting to guide their business decisions. In order to maximize sales and revenue while delegating resources and sales reps more efficiently, sales managers need to be able to predict the future performance of their organization as closely as possible. Here are five key reasons why data-driven sales forecasts are so critical for companies.

(For more detailed information about sales forecasting, check out our FREE eBook: The Ultimate Guide to Sales Forecasting.)

1) They are necessary for managing business effectively

The best sales managers look at a wealth of information to drive all their business decisions, from deciding how many reps to hire for the sales team to delegating pipeline opportunities to each of these reps. For example, an accurate data-driven sales forecast that suggests a 35% increase in opportunities and sales could lead to a sales manager growing his or her team of reps by the appropriate size. All business management decisions should be supported by the growth information within the sales forecast.

2) They provide an outlook into the Near Term Predictable Future of the Business

Sales managers typically report to several superiors who are naturally interested in the growth trajectory of the company, including the CEO and board members. By looking at accurate data-driven sales forecasting reports, these high-level executives can raise concerns if the company is not scaling or growing quickly, or express satisfaction at where the organization is headed.

3) Data-driven sales forecasts facilitate business planning, risk management and help with budgeting and goal setting for the company

Depending on sales forecasts that prove to be inaccurate carries with it a tremendous amount of risk – for instance, making public comments that cite erroneous data or making critical cash flow decisions that prove to be wrong. Therefore, sales managers need the most accurate sales forecasts that have been well-supported by data and sales analytics to mitigate these risks, while also allocating budgets appropriately and setting realistic goals.

4) Accurate sales forecasts drive better business performance due to improved sales performance

Sales reps can perform their jobs more effectively when supported by accurate data-driven sales forecasts. The goals set for them by sales managers would be more realistic – consistently failing to reach lofty goals could be a severe detriment to team morale. Additionally, sales managers can eliminate weak opportunities from the pipeline and avoid having their reps working on these opportunities that are not likely to close.

5) Identifying potential early warning signals and risks in the sales pipeline to help sales teams achieve their goals

Part of providing an accurate data-driven sales forecast involves careful study of the opportunity pipeline and the pipeline history. Doing so also allows sales managers to identify early warning signals and glaring risks in the sales pipeline, giving them a chance to tackle these issues at an early stage before they affect the performance of the sales team. With these warning signals and risks mitigated, reps can more effectively work on the right prioritized opportunities.

Even the best data-driven sales forecasts – supported by a wealth of collated data and the best sales analytics – will be inexact. The key for sales managers is in reducing as many of these associated risks as possible to maximize the accuracy of your sales forecasts and make more effective and efficient business decisions.