An Introduction to Sales Forecasting: Definition & Key Benefits
What, exactly, is sales forecasting? In short, it’s the process of predicting future sales performance by analyzing historical data, current market trends, and other pertinent factors. Accurate forecasting is a critical aspect of sales performance management and should play a guiding role in decision-making, goal-setting, and the measuring of success.
Sales forecasting doesn’t just help businesses better understand their customers, markets, and the competitive landscape; it provides actionable insights into future trends and opportunities. Further, it enables businesses to make more informed decisions about resource allocation, product development, and sales strategies and tactics.
Now that we understand what sales forecasting is, let’s take a closer look at available modeling options.
Common Sales Forecasting Models & Variations
When it comes to sales forecasting models, there are many options at your disposal. For today’s articles, we’ll look at three of the most common: qualitative, quantitative, and statistical forecasting.
The below summaries can help you evaluate which model might be right for your organization:
- The qualitative forecasting model is based on the judgments & opinions of available experts. This method is particularly useful for businesses that might have limited access to historical data or need to predict sales in emerging or volatile markets, for example.
- The quantitative forecasting model uses historical data and mathematical models to project future sales. This method is most useful for businesses that have vast amounts of historical data available or can leverage advanced technology like Artificial Intelligence (AI) to conduct modeling at scale.
- The statistical forecasting model incorporates statistical techniques to project future sales. This method offers a more sophisticated approach to forecasting and can work at organizations where the services and products might have complex sales histories.
Critical Factors to Consider When Forecasting Sales
There are a wide variety of factors to consider when it comes to forecasting sales, including the following:
- Data accuracy. If the data can’t be trusted, neither can the predictions. Be certain to regularly clean and validate data.
- Historical data. This includes analyzing sales data, financial data, and any relevant customer data.
- Industry trends and market conditions. Businesses that keep an eye on industry trends and market conditions are more likely to predict changes that may impact sales and adjust their forecasting accordingly. This includes analyzing economic indicators, industry-specific data, and competitor data.
- Data security. With more information being generated and stored remotely, data security has become a major concern for businesses. Any modeling program you consider must carefully protect all corporate data.
- Flexibility and adaptability. Forecasts should be regularly reviewed and updated as market conditions and other factors change. It’s best if these can occur automatically within an SCMS. This helps businesses to stay ahead of the curve and make informed decisions based on the latest information.
- Cross-functional collaboration. Businesses can create a more holistic view of sales performance and eliminate silos by bringing together experts from different areas of the business. This often includes working with the sales team, marketing team, finance team, accounting team, and other stakeholders.
Sales Compensation Management Software + Forecasting: A Winning Combination
When it comes to improving the accuracy of your sales forecasting, your organization should leverage Sales Commission Management Software (SCMS). With its ability to automatically track and collect sales numbers, customer data, and marketing initiatives, SCMS provides businesses with the key information necessary to make accurate sales forecasts.
This real-time visibility into the sales pipeline allows businesses to quickly and effectively identify trends and patterns, leading to much more informed forecasting decisions and strategic planning.
The software should feature robust reporting and analytics capabilities, so you can easily analyze and interpret data, leading to more informed predictions about future sales. In addition to providing at-a-glance reporting for executives, the SCMS should provide a granular breakdown of critical data.
By capturing and recording all relevant data, such as lead tracking and customer follow-up, businesses can ensure that their sales forecasting is accurate. In short, a quality SCMS provides businesses with the necessary tools to improve the accuracy of their sales forecasting.
What Makes SalesVista the Best Choice for Sales Forecasting, Compensation Management, and More?
At SalesVista, we take pride in what we do — and it shows. We earned our 4.9 Capterra rating by providing the best solution and service on the market. The best part? Sales forecasting is just the tip of the tech iceberg.
We combine cutting-edge technology, like artificial intelligence, with decades of sales compensation experience to offer unrivaled financial modeling. With the ability to assess the financial impact of plan changes before they are implemented, businesses using SalesVista can make informed decisions that drive maximum results.
The proof of concept modeling tool in SalesVista gives businesses a comprehensive comparative overview of financial metrics, such as quotas, commissions, bonuses, and more, for reps and teams. This allows businesses to quickly and easily evaluate the potential impact of plan modifications and make data-driven decisions.
With its innovative technology, advanced reporting, and best-in-class customer service, SalesVista provides businesses with a comprehensive solution for managing and optimizing sales performance.
Ready to take your sales forecasting to the next level? Schedule a free consultation with our experts to see how SalesVista’s SCMS software solutions can benefit your business. Or if you would rather see for yourself you can always request a demo by clicking the link below.
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