Sales forecasting methods are used to predict how much of a particular product is likely to be sold within a specified future period in a particular market at a specified price. Using accurate sales forecasting methods is vital for any business to be able to produce and sell the required quantity of goods at the right time. Furthermore, by helping companies to gauge the demand, sales forecasting techniques ensure better inventory management.
Why are sales forecasting methods important?
By leveraging the right sales forecasting methods that suit the business, companies can spot potential threats and demand fluctuations while there is enough time to avoid and mitigate them. For instance, if a business uses sales forecasting techniques and notices that their team is trending much below quota, it gives the business the opportunity to understand what is going wrong and undertake a corrective course of action. Discovering such problems at the early stage rather than at the end of the month or the quarter makes a huge difference to the overall sales. Sales forecasts can also be taken into consideration for a decision including hiring, resource management, goal-setting, and budgeting.
Failing to meet the forecasted goal can significantly hurt stock prices. This can be avoided by leveraging the right sales forecasting methods and strategies. Request a free proposal to know how experts at Infiniti research can help you choose the right sales forecasting methods for your business.
Factors that affect sales forecasting
Sales forecasts are often influenced by both internal and external factors of an organization. These factors can also greatly influence the sales forecasting methods chosen by companies.
Changes in sales territory
If territory assignments are shuffled, boundaries are redefined, or a new sales territory management plan is introduced, there are chances of a temporary dip in sales. However, sales will bounce back to an even higher point once the company’s sales representatives adjust to their new, optimized territories.
Changes to the compensation plan
If a company decides to make changes to its sales compensation plan or commission structure, it is likely to have an impact on the sales structure. For instance, if a company switches to a structure that rewards sales representatives for increasing revenue rather than closing more deals, their forecast should anticipate fewer new accounts with a focus on targeting higher-value customers.
Changes in the team size
When more sales representatives are hired, the company will expect a spike in sales as more people on the team are working to close deals. Likewise, as sales representatives quit or retire there might be a dip in sales until a replacement is found.
Changes to products or services
Whenever a business introduces a new revenue stream, releases highly-anticipated features, or restructures how offerings are bundled or priced, the changes will impact their sales forecasting methods. If a new offering enables sales reps to speed up the sales cycle or increase their win-rate, for instance, the sales forecasting methods used should reflect that positive gains.