So, it’s forecast time. You’ve been through it before - as a sales rep, now as a sales manager. Now, the company’s counting on you to deliver a forecast that will set the stage for the post-pandemic future - a time of investments and heightened expectations.
Under this kind of pressure, even the savviest sales manager may miss crucial data points while building his or her forecast. In most companies, there’s a reason for this: data that can build a more accurate forecast is marooned in silo’ed systems across your sales organization. Rounding it all up is hard to do, and that forces managers to focus on the traditional data sources before time runs out.
But it’s worthwhile to dig out some additional data sources that can make a big difference. Here are five frequently forgotten bits of information that can prove invaluable in fine-tuning your forecast accuracy.
1. Frequency of Sales Turnover
We know you’re thinking about it - sales turnover is becoming a bigger deal with each passing year. In Xactly’s State of Enterprise Sales Performance 2021 survey, 58 percent of business leaders said their organizations saw a higher rate of voluntary sales churn, and 60 percent said they also exited people at a higher rate than in years past.
Smart organizations are building plans to anticipate turnover on the sales staff, but these efforts are largely anchored around recruitment, on-boarding and training efforts. Getting the new seller's productive as fast as possible is an important objective - but so is understanding how sales churn, and the temporary drop in productivity incurred while adding new sales reps, impacts your results.
Examining your historical data will reveal the average cost to your organization of losing reps, and it should tell you how long it takes for new reps to become productive. Combining this with an estimate of the number of reps who will depart the company will give you an idea of the cost to the company of losing them; the time-to-productivity number, multiplied against the number of new reps, can tell you how much capacity you’re losing while bringing new sales people up to speed.
2. Average Margin
As revenue becomes more of a concern for businesses, more attention is being placed on margin from the c-level types. It only makes sense - not only are bigger profits better, but they result from greater efficiencies throughout the organization, making them a good barometer of health.
Higher margins mean more real revenue per sale. But from a forecasting point of view, knowing which products and which combinations of products have higher margins, and the sales trends for those products, can help you make your sales and revenue forecasts more accurate. Knowing the higher-margin items in your catalog helps you coach your sales team about what to sell; knowing the sales team is working with an emphasis on those products informs the forecast; and having a forecast that takes into consideration the impact of higher-margin sales enables sales to project sales and give educated guidance to finance about profits. High-margin sales allow your sales team to have a bigger impact on profitability even when their forecast numbers don’t increase.
3. Packages vs. Products
What are your sales reps selling - and what are your customers buying? Using systems like CPQ to determine the most frequent combinations of products and services in closed deals can help you coach your sales team, and can indicate ways that new products are being received and how they fit into your product mix. When your tactics move toward selling solutions that have already seen success together, build that into your forecast.
For example, if deals for Software W include Service Product X, Storage offering Y, and Training offering Z in 60 percent of the time, and you project sales of Software W to increase by 15 percent in the next quarter, you can project that product mix to be sold with it in 6 of 10 deals. This is a more accurate way to look at solution-based deals than making assumptions about sales of complimentary products on their own.
4. Lead Sources
One of the most useful yet overlooked fields in your CRM system is Lead Source. It’s often ignored and left blank, perhaps because sales most often inputs data into the system, and Lead Source seems like a backward-looking piece of data that only serves to give marketing credit. No matter the reason - failing to track Lead Source is a major mistake. Not only does it blind the organization to data that can help it refine marketing, it deprives sales of a useful way of examining its pipeline when it’s time to develop the forecast.
Looking at Lead Source enables you to determine which sources produce the best leads. For example, leads created by events may close at a higher rate than leads created by outbound marketing. If the pipeline entering a quarter is filled with those show leads, you may be able to adjust your forecast upward in anticipation of a higher close rate. Tracking lead source on a more granular level can help determine close rates on an event-by-basis and make your forecast even more accurate.
5. Changes in Regulation and Compliance
When the rules governing things that relate to your products change, it will have an impact on your sales, for good or for ill. For instance, the quarter before the implementation of GDPR was a rough one for marketing automation vendors. By the same token, it was a good year for vendors who sold compliance software. New laws affecting the use and disposal of certain materials can impact the price of semiconductors, which can impact future sales.
Trade deals that open new markets may suggest that sales will be higher in the near term. These are just a few obvious examples; every year, the implementation or elimination of regulations cause shifts in markets that will show up in your sales results. Anticipating the impact requires some study and evaluation of how they will affect your business, but once your business understands how a change may affect sales that should be built into your next forecast.
Want to learn more ways you can increase your forecasting accuracy? Download our guide, "6 Strategies to Build an Accurate Sales and Revenue Forecast."