October 24, 2021

Written by

Collective[i] Team

  • Posted in
  • Leading Indicators
  • Sales Forecasting

Why leading indicators make a better sales forecast

There’s an age-old adage that sales is a numbers game. And while not technically wrong, this saying lacks a key point of clarification. Sales may be a numbers game, but the winners of the game are those who understand which numbers are important — and which aren’t. Using the right data and metrics is paramount to developing an action-oriented sales forecast that works for C-suite execs and sales teams.

Of course, every industry has its own benchmarks for what it considers to be good, useful data; however, generally speaking, data for sales forecasting should be:

  • Future-focused to ensure sales teams are looking ahead, not behind.
  • Balanced with internal and external information for a more holistic view.
  • Measurable and specific so everyone involved is on the same page.

Of that data, possible key performance indicators (KPIs) can be split into two categories: leading indicators vs lagging indicators. The quickest and easiest way to get good, useful data and transform it into an effective sales forecast — one that can project revenue and identify the best daily actions to meet sales quotas — is to make use of what’s called leading indicators. In this article, we’ll talk about leading and lagging indicators and why leading indicators are the future of better sales forecasting.

Leading and lagging indicators examples

First, what are lagging indicators? They are KPIs that look toward the past to predict the future — typically gathered through historical forecasting methods. What is an example of a lagging indicator? One commonly used example in business is the percentage of closed and lost deals over the past three years. And while historical data can certainly be useful to analyze past performance and decisions, it can’t tell what’s to come. There are simply too many factors at play.

If the past isn’t a crystal ball for the future…leading indicators can certainly get teams closer to it. The term “leading indicators” describes a set of KPIs that look to the future to create a more telling sales forecast. What are examples of leading indicators? Examples of leading indicators in business include tracking sales activities like:

  • Number of meetings and presentations scheduled for the next month
  • Number of sales in the pipeline, including what stage they’re currently in
  • Meeting summaries with qualitative information about the potential to close
  • Implementation plans and the engagement level of the buyer in the sales process

leading-indicators-messer

Leading indicators: the future of sales forecasting

As illustrated by the leading indicators examples above, leading indicators use current internal and external sales and market data. When analyzed and used properly, this data can provide insight into how current performance will impact revenue, growth, and other key business factors.

Collective[i]’s platform is the only product on the market that uses leading indicators to predict sales. Driven by artificial intelligence (AI), our platform captures internal and external data to provide a precise, continuously updating forecast for teams. The leading indicators used by our network offer a glimpse into how daily changes — in the market, buyer behavior, or other factors — impact your month, quarter, and year.

According to Stephen Messer, co-founder of Collective[i], “Our network allows you to look at leading indicators — not lagging — to see how things are changing and what that means for a company’s revenue before they get a surprise two or three quarters down the road.” This means better revenue forecasting for C-suite execs and sales managers.

What’s more, the true power behind leading indicators is that they enable companies to course-correct when factors — such as the economy, competitors’ products, or leads in the sales pipeline — undoubtedly change. At a time when sellers spend less than a third of their week selling to clients, according to McKinsey, there’s little time for analyzing potential approaches — and their consequences — to select the best course of action. Sales teams need fast, actionable steps. That’s where Collective[i] can help. Our Intelligent InsightsTM tool analyzes all the available data to provide sellers with a daily list of recommended actions, news, and risk alerts to drive better results.

When it comes to leading indicators, “our goal is to really enable companies to better predict, manage, and grow their revenue,” says Messer. “What’s in your pipeline now will make up tomorrow’s sales forecast. Leading indicators make sure that the pipeline is always being observed, and teams can compare the two to make sure that their month, quarter, and year aren’t getting sacrificed by obsessing on this week alone.”

If you’re ready to find out the difference leading indicators can make for your sales team, reach out to Collective[i] today.

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