There are several forecasting tools to help business owners make accurate revenue predictions. Effective forecasting is essential for any business. Without accurate sales forecasting methods, you are unable to make calculated business decisions, plan marketing, allocating capital, or analyze strategy. Similarly, inaccurate sales forecasting can be detrimental to your business operations. When forecasted data is inaccurate, you could potentially make strategic decisions that are not in the best interest of your company. Luckily, there are several accurate methods to ensure that you do not over or underestimate sales. read on to learn more about the top sales forecasting tools for accurate revenue predictions.
Historical forecasting is one of the simplest ways to predict your sales for future periods. Unfortunately, because these results are so simple to obtain, they are not always 100% accurate. Look at your total revenues from the past month, quarter, or fiscal period. With this information, you can assume that your sales will be the same as those previous periods, or more if your business is experiencing consistent growth. If you totaled $20,000 of sales throughout February, assume you will sell the same throughout March. If you have historically been experiencing monthly sales increases of 5%, consider estimating your March revenues to equal approximately $21,000. Consider the historical prediction forecasting tool in order to estimate future revenue.
Length Of Sales
Many modern businesses are familiar with using the length of sales forecasting tool in order to make accurate revenue predictions. Using the length of sales model helps you accurately estimate when a deal will close. Calculate your average sales cycle in order to best determine how long it takes you to locate a sales prospect, negotiate, and close a deal. In order to make this calculation, divide the total number of days to close deals by the actual number of deals closed. For example, if you closed three deals within a recent period, count the days it took to go through the sales process. Calculate the mean of these numbers in order to determine the average sales you can close in a specific period. Understanding these figures, you can best estimate revenue possibilities. Accurately monitoring sales forecasting calls for better business insight. Consider the length of sales model in order to make accurate sales forecasts for future periods.
Intuitive estimation is a simple and time-efficient method to estimate revenue predictions. Rather than assessing sales figures and making calculated predictions, simply ask your most trusted sales representatives on the likelihood of deal closure. Ask reps what the likelihood that deals will close, the estimated time until closure, and the total value of the deal. While this is not the most accurate sales forecasting model, questioning your sales reps provides you a better understanding of their awareness, ability to read prospects, negotiate, and close deals. On the other hand, be aware that sales representatives are generally optimistic and generous with their estimations. Consider intuitive estimation to easily forecast revenue predictions.
Many business owners look to the opportunity stages forecasting model in order to make revenue predictions. The opportunity stages model breaks down your sales pipeline to make effective sales predictions. Most commonly, sales pipelines consist of prospecting, qualifying, quoting, closing, and analyzing the win or loss. Whatever your specific business stages are, create a win likelihood for each stage in the pipeline. Then, multiply each win likelihood by the potential of the deal. By breaking down these stages, you can quickly estimate revenue without completely relying on historical data. If you have a $1,000 deal with only a 10% win likelihood, you should only estimate roughly $100 in revenue. However, if you have the same deal with a 75% win likelihood, you can forecast $750 on the same project.
Forecasted Stages Model
In addition, business owners can use the forecasted stages model in order to make accurate revenue predictions. Unlike the other forecasting tools mentioned above, the stages model assesses qualitative data. Qualitative data assess quality of data rather the physical quantity, as found in quantitative assessment methods. The stages model breaks down several key components of your sales and closing process, then evaluates them individually to best make revenue predictions. Deals can only fit into one forecasted stage depending on their current progress. Most commonly, business owners assess best case, pipeline, commit, and closed or won. The best case stage concerns deals that are likely to close, but everything must go perfectly in order for them to do so. The commit stage represents deals you are committed to closing. Pipeline refers to deals currently in progress that cannot be classified as won or lost. Furthermore, the closed or won category discusses deals that have been transferred to ‘won’ and are now positively contributing to forecasts.
There are a number of sales forecasting tools for business owners to accurately predict revenues. The top forecasting methods benefit businesses in a number of ways. Most commonly, business owners can assess historical data or ask their representatives intuitive forecasting questions. However, you can additionally calculate your sales cycle to estimate your revenues through the length of sales models. At the same time, you can additionally break down your pipeline and forecast sales through the opportunity stages mall. Furthermore, you can utilize the forecasted stages model in order to assess qualitative data. Consider the points above to learn more about the top sales forecasting tools for accurate revenue predictions.