What is the importance of sales forecasting?
Agile businesses are successful not only because they respond quickly to market changes, but when they are structured to respond holistically, from the ground up. And see the changes coming before everyone else.
It’s reductive to pigeonhole sales forecasting to the dominion of the sales team. The objectives of sales forecasting include and affect so much more, including production, budgeting, financial planning, supply chain management, risk assessment, marketing, and human resources.
When a business appreciates how sales trends will impact the whole business, they are in a good position to action the forecasting findings across the business.
What is meant by “sales forecast?”
Businesses can predict future revenue by forecasting sales through different methodologies, often relying on historical data, market and industry analysis, consumer behavior trends, and other impactful information to reveal patterns that can predict future outcomes. This understanding of future revenue then helps them make healthy, nimble business decisions.
The benefits of an agile sales forecast are multipronged and prevent businesses from remaining stationary in the midst of market changes. The same sales approach won’t work over time and across consumer behavioral changes, and the ripples of those changes in sales can impact the entire business.
Where and how do businesses look for the patterns in the market to predict changes in the short and long term? In the science (and art) of sales forecasting.
What is sales forecasting?
There are many different types of sales forecasting methodologies businesses rely on to help them understand market trends. Traditionally, there have been two main aspects of forecasting most methodologies incorporate: qualitative and quantitative. Quantitative forecasting relies on numeric and statistical data to observe different trends or patterns that might repeat or reflect overall change. Qualitative forecasting is based on the opinions and judgements of subject-matter experts in a given field whose sales predictions continue to show merit. Many sales teams use techniques from both approaches to build their forecasts.
In the past, sales forecasting has run the risk of relying too heavily on one set of data against another — be it qualitative or quantitative. The opinions based on expertise and years of hands-on knowledge from a sales team member matched against the recent data collected and analyzed through Opportunity Stage Forecasting, for example. Sales forecasting from both are important, but to accurately adapt the varying parts of your business to a changing market, more is required — including data and activities that take place outside a business entirely.
What is the importance of forecasting to planning?
Part of sales forecasting involves looking at the sales themselves to better understand buyers — what contributes to consumer behavior, what successful sales have in common — but that’s not the only element that comes into play. Market data can also speak volumes about trends that the entire business should be aware of so they can plan around them.
Logistics are the backbone of any good sales strategy, and businesses need to fully understand the components of forecasting in the supply chain and how future demand will affect each piece.
For example, marketing strategists generally know outright when certain marketing on a particular product will increase sales — but there’s more to consider that can sometimes fall out of the purview of just marketing or sales. Increased sales of a product will add strain on production and manufacturing, and could lead to shortages. Human resources needs to be able to plan their budgets to recruit effectively and make sure there’s labor to support the revenue streams expected to grow. When considering supply chain and sales forecasting, there’s more to the equation than just how markets will respond to business decisions and sales strategies — it affects the entire business.
This is just one example of how traditional sales forecasting models are limited — they’re too small in scope, and they don’t take into account how the outcomes can be applied to other elements of the business. This is where AI-enabled, prescriptive forecasting can be a game-changer, looking at a more complete set of data and interpreting how it might impact a business as a whole.
What is the importance of forecasting?
Forecasting sales is important not just to give sales teams a guide for future actions, but also to give an entire business the insights it needs to prepare to meet demand.
Collective[i] pairs AI-enabled technology with the data collected by traditional sales forecasting methods, so you’re equipped to adapt every part of your business to ongoing market changes, in real time. Our networked intelligence automates your company’s sales activities while gathering data from across industries and markets to provide comprehensive recommendations for your business, utilizing machine-learning to turn enormous amounts of information into pragmatic recommendations and action items.
Explore Collective[i] today to see how this type of prescriptive, AI-enabled sales forecasting is helping businesses globally plan and improve outcomes across their organizations.Explore Collective[i]