Sales forecasting

CRM Sales Forecasting Guide

What is CRM sales forecasting?

When it comes to CRM sales forecasting the rule of thumb is this – the more accurate the information you have, the more you can prepare and plan for the future.

However, understanding the past to predict the future is an inexact science. Having access to the correct data is one thing, applying the right methods to extract the correct conclusions is another matter.

Using a modern and effective CRM, like Teamgate, can assist in providing you with an accurate, and well-engineered sales forecast. This, in turn, can help you avoid major, and costly mistakes when it comes to planning marketing campaigns, lead gathering strategies, stock control, hiring practices, and the overall management of the entire sales process, and it gives you the ability to correct off-course sales directions faster than your competitors.

Why you need a sales crystal ball

What happens when you don’t have the ability to forecast for future sales? The answer is simple – bad things happen!

Without the in-depth insights which come with CRM sales forecasting your business is wide open to all kinds of catastrophic scenarios.

Managing the money – Being able to forecast future sales helps you manage for the future. Will you be in a position to invest further in your business, or is the time coming to tighten the purse-strings. It will also help you to understand better your cash flow situation, and to plan for any future financial shortcomings.

Purchase power – Managing stock levels can greatly depend on your ability to create accurate sales forecasts. Creating a CRM forecast will offer you a better insight regarding strategic investment, additional stock purchasing, or increased marketing spend. Plus, CRM sales forecasting can help you picture future economic trends and plan in accordance.

Sales forecasting and forward budgeting go hand in hand.

Future thinking – Uncertainty in the future restricts your ability to take advantage of changing situations and act faster than your competitors. It can also rob you of the opportunity to expand at just the right time – an opportunity that doesn’t come around too often.

The sales forecasting process using a CRM

We’ve already said it, and we’ll say it again, sales forecasting is not easy.

In order to predict trends accurately CRM sales forecasting tools should be part of your business armoury. But, in order to engage in accurate sales forecasting, your sales leads needs to be scored using a common ‘criteria’. These scores can then be used to evaluate the likelihood that a lead or a deal will close within the desired time-frame.

There are several main methods of sales forecasting using your sales CRM

Forecasting by Sales Funnel

sales forecast sales funnel chart

In order to use your sales funnel as an accurate means of sales forecasting, it’s imperative to have a clearly defined sales process, with clearly defined stages. If you don’t have that clearly defined process in place, using your sales CRM for accurate forecasting is almost impossible.

Without a set sales process in place, you lose the opportunity to create a scoring system which can forecast sales accurately.

The main idea behind sales funnel forecasting is allocating a percentage to each stage of the sales pipeline. This percentage will represent how likely it is for a deal to convert to a sale at each stage of the pipeline. Obviously, the percentage will increase the further the deal journeys through the sales pipeline. For example, pipeline stages could be ranked in the following manner:

  • New leads – 10% potential win rate
  • Qualified leads – 25% potential win rate
  • Proposal – 50% potential win rate
  • Negotiation/Bargaining – 75% potential win rate
  • Deal Closing – 90% potential win rate

A quality CRM like Teamgate lets you easily appoint percentages to stages directly within the pipeline, making it easy to understand at a glance where every deal sits in the process, and the overall likelihood of conversion.

Advantages

All new data entered into your sales CRM software goes towards future forecasting. The more information you gather, the more accurate your sales forecasting will be.

Disadvantages

Without having a clearly defined sales process in place, using your sales pipeline to forecast future sales can prove almost impossible.

Forecasting by Score

crm sales forecasting lead scoring

In order to understand the likelihood of a deal closing, you need to have a reliable scoring system in place. One of the best methods of sales forecasting is by allocating scores to the source of your leads.

The lead score will reflect past sales performance when compared to similarly sourced leads. Past results will offer insights into how much time a lead took to convert to a deal, plus, how long the deal took to close.

For example, deals which came from the following sources may be scored in the following manner:

  • Referral – 8.1
  • Email campaign – 7.2
  • Landing pages – 6.5
  • Social media – 5.4
  • Cold calling – 3.6

Referral is placed higher than social media on the list, due to the fact that historically the sales team have closed more deals from referral sources, than from social media sources.

If you use source, plus a number of other criteria – ie. company size, number of employees, etc. – you can create an even more accurate method of identifying deals which are more than likely to close, and are therefore more entitled to your time.

Advantages

Forecasting by sources removes any emotional involvement in the sales forecasting process. All forecasts calculated in your CRM are based on hard facts and reputable data in order to bolster results.

Disadvantages

If salespeople don’t complete all of the requested data in their sales CRM the results will be inaccurate and only measure certain attributes of the sales process.

Forecasting by Regression Analysis

crm forecast sales forecast chart

By far the most difficult method of sales forecasting, but the method which garners the most accurate information. CRM forecasts using regression analysis uses strict mathematical theories and equations to measure covariance and correlation between variables.

As complicated as this may sound, accurate record keeping and stringent data entry in your sales CRM is imperative for regression analysis to be really effective. But, once that data has been gathered correctly and entered into your CRM simple mathematical equations can use this data for concise sales forecasting.

Most companies can only dream of sales forecasting using this method, however, data collected in your CRM can go a long way towards making this a possibility.

Advantages

As the forecasting equation is based on a strict mathematical formula, results tend to give more accurate, and more actionable results.

Disadvantages

The data collected in your CRM needs to be clean, concise, and accurate to formulate accurate results.

Accurate forecasting will drive your sales forward

As with all statistical analysis, the results are only as good as the data entered. Sales forecasting is a complicated process, but a vital one to keep your business moving forward, for allowing you to see opportunities for further investment, and for identifying possible difficulties ahead. An accurate sales forecast process lets you make faster, more targeted business decisions.

In order to have the most effective forecasting process possible, attempt to educate your entire sales team in the task of regular, and accurate data collection and update. The more accurate the information you have, the easier it is to future-proof your business.

Teamgate sales CRM goes a long way towards allowing you to easily gather the information you need – even automatically – in order to create sales forecasts which can really help you understand your business more intimately.

And remember always – forewarned, is forearmed. 

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Vytautas Ramanauskas

Vytautas is a marketing specialist. A writer by day and a reader by night, he is passionate about helping people in all aspects of technology, sales intelligence, online marketing, and design.
Find him on Twitter @vytautasram

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