Creating A Better Approach to Sales Forecasting & Revenue Predictability

Posted by LinkedSelling in B2B Lead Generation & Sales Development

Every business wants to be able to accurately forecast their expenditure, their revenue, their sales, and more.

If you can accurately predict how many sales you can close every month or every quarter, you can plan ahead to make sure you have the budget, the supply, and the team you need in order to close and service those new sales. 

However forecasting is easier said than done - if you want to pull an accurate forecast, that is.

On the flipside it should give you insight into if and when it’s time to investigate new sources of lead generation for your sales team. If your forecasts look low, it’s time to make a change.

Business decisions are made by looking at previous results and upcoming projections based on that history. If you have wholly inaccurate projections, it will hinder your ability to make good decisions moving forward.

There are a number of factors that play into the rampant inaccuracies in sales forecasts today, but the point is that any discrepancy in projections and forecasts can cause major issues that can affect every department in your organization.

The biggest problem is that it’s easy to overestimate your forecast if you don't have consistent leads and sales opportunities in your pipeline.

79% of sales organizations miss their sales forecasts by more than 10%.

Unfortunately, one of the biggest reasons for inaccurate forecasts is simply not having enough opportunities on a consistent basis to build the right predictive model for your organization and the different lead channels you use.

This statistic from HubSpot clearly illustrates that to hit or even set appropriate goals, you need a consistent flow of opportunities:

72% of companies with 50 or less new opportunities per month didn’t meet their sales goals. (Hubspot)

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Let’s take a look at each of the factors that affect an accurate forecast:

Lack of Consistency

Once you consistently get x amount of leads in your pipeline over a period of time, you start to see the trends from one month to the next. From there, creating an accurate forecast is just a math game because you’ll know that if you get 50 leads this month at an average cost per lead, and you have an average conversion rate, you’ll have a pretty good idea of what your total acquisition costs will be and how many sales you’ll close.

Activities that Don’t Contribute to the Bottom Line

Again, a big mistake that affects your ability to make an accurate forecast is the focus on activities that don’t directly drive sales opportunities. You want to be able to measure a direct correlation to what affects the bottom line. This is good news and means that you can probably cut a lot of the effort you’re spending on certain activities like creating content.

Outdated or Unrealistic Quotas

Many times the quotas that we aim for are outdated. Many times they don’t take into account quality leads vs quantity, or they’re meant for short term wins and don’t support long term goals. When casting your forecast, you want to make sure that the quotas your team aims to fill are in line with your goals.

Outbound Lead Gen Vs. Inbound Lead Gen

Another way to strengthen your forecasts is to consider the flexibility and reliability that outbound lead generation offers as opposed to inbound lead generation. With outbound lead gen, you have control over the quantity of people you connect with and speak with. 

Inflated Pipelines

The first step to better forecasting future sales is to understand the lead volume necessary to hit your total sales goals.

This comes with building more consistency into your pipeline - both top-of-funnel and bottom-of-funnel - as well as insight into the outreach channels that are most effective at generating opportunities.

By getting consistently full pipelines that are managed effectively, you’ll soon have better forecasting capabilities drawn from historical results. 

Marketing needs to consider what kind of leads are filling up the sales pipeline to begin with. If they are stuffing the pipeline with unqualified leads in the first place to make their results look stronger, it doesn’t contribute to the overall goal of the organization and can lead to inaccurate forecasting by their sales team. This often happens on the side of the sales team as well,

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"Though AI and other advanced technologies have been applied to improve forecasting accuracy, sales leaders still get blindsided by forecasts that turn out to be embarrassingly over-inflated. 

Though most salespeople know deep down that a stale deal is really a lost deal, they often fear the moment they must admit to their team that it is lost. So they cling to hope. This inflates pipelines and prevents both leaders and teams from seeing the gaps in their forecasts.” - HBR

At LinkedSelling, we only consider a lead a true “lead” if the person is qualified and agrees to an appointment, but not every department out there holds their leads to that standard.

It’s not uncommon for teams to allow leads in their pipeline that only take up space and energy from the sales reps trying to contact, build a relationship with, book an appointment and close a deal with someone who wasn’t an ideal prospect in the first place.

If you count only qualified prospects and leads, your forecasts should start improving by giving your sales team a better starting point to prioritize their time and energy.

Forecasts are an important part of any business interested in planning for future growth. Consistent, transparent, and quality prospects make a huge difference in whether or not your forecasts will be accurate. 

If you’d like the benefit of a full pipeline of quality leads, let’s talk. There are several options for each stage of business and we can help develop a strategy so you get a consistent stream of the right leads for your business. 

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