Now you may say, isn’t sales forecasting predictive by nature in itself? Well, that is partially true, but the factors that get counted to arrive at an accurate prediction of sales revenue, well into the future, are what we aim to highlight by way of this blog.
In the following sections, we define and describe sales forecasting and its benefits and briefly take a look at the traditional sales forecasting methodology. Then we move on to how predictive sales forecasting is achieved and how it is changing the way business will be done in what is remaining of the 21st century.
Sales Forecasting that was
Traditionally sales forecasting has been heavily dependent on time series data, where sales revenues pitted against periods give a fair indication of seasonality. Sales forecasting in its true or original sense was an activity undertaken to determine how much sales or revenue a business can earn in a given period and given the resources available at hand how much should be the budgetary allocation towards several initiatives on an annual basis. Other factors that are considered include input from sales folks on the ground, market seasonality, and pure intuition.
The Next Big Thing in Sales Forecasting
So what has changed in sales forecasting so much that it is touted as the next big thing? Well, like everything else in our world, Artificial Intelligence is taking the sales forecasting scene by storm. The paradigm of measuring only the critical parameters and leaving the rest out of calculation has turned topsy turvy. Now everything in the system, well almost everything, needs to be measured. Data is the quintessential gold of this digital world. So what changes from what was the good old way of sales forecasting?
To start with, intuition goes out of the window. Everything is based on facts. With machines capable of processing massive volumes of data in seconds and algorithms that can sift through the data like humans can, but at a real level, giving you a fact-based conclusion in minutes is too sweet a proposition for any business. This of course needs an ecosystem that is capable of capturing every bit of data for archiving and processing purposes. Something IT folks call ‘Big Data’.
Another big change is the power to read( or stream in), record, process and analyze data points from multiple sales channels. Traditional sales forecasting methods could not scale up efficiently to such a wide array of sales channels that are now available for any business to exploit.
So now business leaders do not need to ask or wait for reports to make decisions, or sales leaders do not have to wait for input from their data analysis team to churn out data and numbers to come up with a decent sales forecast. Business leaders can ask their questions straight up to the machines and get quick answers.
The artificial intelligence tools or shall we say technologies like Machine Learning and Deep Learning enable sales leaders to curate sales forecasts as accurately as possible allowing business leaders to efficiently budget and plan business growth.
Why Predictive Sales Forecasting?
To answer that question, we will need to understand the importance of the sales forecasting exercise, or rather what are the downsides to missing a sales forecast arrived at using traditional methods.
Here is a shocking trivia about sales forecasting. 80% of sales orgs do not have a sales forecasting accuracy of more than 75%
One critical inference that investors and stakeholders tend to make when a business fails to meet its sales forecast is that somehow the business is not fully engaged with its market. This is not good news for any business that wants to eventually go public. Investors would be worried about the way the business is being conducted at the top level and shaking their confidence in the business. A missed sales forecast also indicates a problem with sales and marketing campaigns. So what are the immediate benefits of using predictive sales forecasting?
A predictive sales forecast will invariably produce a near accurate sales forecast while being completely based on facts. Accurate sales forecasts will result in not only boost investor confidence but also positively impact business efficiency, marketing campaigns, and customer relationships.
Efficient Business Management
The ability to accurately forecast sales into the next quarter and beyond will help improve the business’s cost of capital, positively impact its share price, and enable it to grow organically. Your business’s cash flow, an important yardstick for evaluating business efficiency, is greatly dependent on how tight and efficient your operations are. An accurate sales forecast allows you that free hand in running the business and keeping a steady stream of cash flow.
Instant Review of Marketing Campaigns
An accurate sales forecast lets you know almost immediately if your marketing campaigns are on the money. You immediately know what is working for your business rather than groping around in the dark to get to the best fitting marketing strategy.
Mitigate Sales Pipeline Risks
You as a business leader will know very well that sales teams tend to forecast their quarter or year-end sales based purely on gut feeling, well at least most of it. A predictive sales forecasting framework lets you sanity check such forecasts and calibrate sales processes. This effectively results in reducing pipeline risks and surprises at the fag end of the quarter or a year.
Predictive sales forecasting runs on data. The data in your sales performance system, the data in your incentive calculation system, and more. If you are still trying to manage with the spreadsheet-based system for calculating sales performance-based incentives, it’s time to move on. Presenting Sales Performance Management and Incentive Compensation Management by Kennect. Kennect offers you these two independent but seamlessly working solutions to manage all the hassles around sales performance management and incentive calculation. Kennect solutions are intuitive, intelligent, and based on real-time data. While you as a sales leader benefit from the insightful and real-time dashboards and reports, your sales folks get back to what they do the best, selling!
Ask for a demo right away!