Predictability in sales allows you to make the right decisions, based more on data than guesswork; understand what it is and how to do it
Predictability in sales, sales projection, sales forecast … No matter what name you use, the most important thing is to know how to use this resource, which is so important for the operation and health of your company.
The sales machine needs investments to continue generating results. In other words: no sale happens for free. It is necessary to invest time and money in training, alignments, tools and, of course, demand generation. These investments can be made more secure when they are based on a reliable sales forecast.
In this post, park view villas lahore will make you learn what sales predictability is, why it’s important, what types exist, how to set goals based on sales projections, and much more. Check out!
What is predictability in sales?
Having predictability in sales means having a perspective of how much the commercial area will be able to sell in a given period. In this way, the company is able to make better decisions, based more on data than on guesswork.
Commercial predictability is useful on several fronts. For managers, for example, it allows them to have an idea of how many deals will be closed in the month, quarter or semester. For the board, it provides inputs to make accurate investments.
Why is it important to have predictability in sales?
Sales predictability is important for several reasons. Know the main ones:
- Know if the team will meet the goals: for managers, predictability in sales allows them to know if the team will achieve results at the end of the period — if not, it is possible to take actions to achieve the goals. If things go well, managers can focus efforts on actions to maintain the energy of those they lead, seek promotions, among other actions.
- Measure the area’s growth: making a simple calculation, if the company knows how many sales will be made in the period and has an average sales per professional, it can, with this, deduct the number of salespeople needed to reach the goal;
- Seek investments: when the board goes to seek capital, it can show sales forecasts to convince potential investors;
- Attract internal resources: with the sales area working in a predictable manner and with proven results, it is easier to attract resources from the company as well.
Types of sales projection
When making their prediction, many managers feel insecure. After all, how to know if a projection is adequate to the company’s possibilities? How to prevent an unattainable goal from being imposed?
To answer these questions, it is necessary to assess where the company is. In this article, we’ll talk about three possibilities:
- market-based projection;
- projection based on history;
- Projection on stocks.
Market Based Projection
For start-up businesses – which do not have a lot of time in operation and, therefore, have little history to base themselves on – we recommend the projection based on the market.
In this modality, it is very important to know the market in which you operate, the demand that exists for your product or service and be clear about your competitors and their strategies. It is also essential to understand the local economic situation.
To create a sales projection based on the market, try to come up with the answers to these questions:
- Who buys your product/service? Is this portion of the population actively consuming at the moment?
- Are your competitors succeeding in sales?
- How much do you need to sell to support your operation, basically?
Starting from these points, you can get a feel for the scenario and draw an initial forecast to guide sales. Throughout the year, this forecast can be adjusted as the results appear.
Projection based on history
For companies with more baggage, the ideal is, in addition to mapping the market, to make sales projections based on history. This means looking back and evaluating the actions and their results, so that the sales team can surpass the previous year.
- How much was necessary to invest to achieve the result;
- Which bottleneck points hampered sales and prevented a better result;
- What are the expectations of the market and the local economy for the coming year, and how this can affect your buyers?
Thus, you will be able to project growth on the sales volume that your team can guarantee. In other words, the benchmark becomes your company’s performance, which, with the right investments, can improve every month.
A third type of sales forecast is a stock forecast. This type works when the company plans a punctual action that can generate an increase in sales volume. It can be a marketing action, a promotion (like Black Friday or special Christmas offers) and even participation in an event (like the RD Summit 2019 ).
Projecting the result of an action is a little more complicated, because it involves the investments that the action needs, the volume of demand it can generate (and the quality!) and the sellers’ efforts to accommodate this extra demand and transform it into revenue.
A punctual action occurs parallel to the company’s normal sales flow, and therefore its sales forecast must also be parallel to the overall forecast for the year.
We therefore recommend having a fixed projection for the year as a minimum to be reached and then complementing it with the stock forecast. Don’t count on the result of future actions to reach your minimum!
How to set goals based on sales projection
We can conceptualize the sales projection as a planning process in three parts: strategic, tactical and operational. You need to set goals in the three steps.
Strategic planning is broader, thought out in a macro way, focusing on the company’s ultimate objective. It’s that main goal, which will occupy the most important slide in your presentation.
Once the objective is defined, we will divide it into steps, in steps necessary to reach it. In general, companies divide the year into quarters, distributing the year’s goal into four major goals. Thus, they can assess the results of each step and have time to correct mistakes and get back on the right track.
At the operational level, we must list the tasks that need to be performed month by month to achieve this goal. This is where the biggest management challenge comes in, which is precisely to break a macro objective into several “micro-goals” – which at the end of the year will make up the desired final result.
The SMART methodology
With your sales forecast in hand, we indicate you to structure goals using the SMART methodology. According to her, the goals should be:
- Specific, that is, specific, direct, objective. For example, doubling the number of customers compared to 2019;
- Measurable, that is, measurable, with indicators attached to check whether they have been achieved or not. For example, tracking the number of new contracts in 2020;
- Achievable, that is, attainable, possible. For example, investing in improvements to double the sales team’s performance compared to 2019;
- Relevant, that is, relevant, important to the business. For example, doubling the number of customers will make the company have more revenue, which will allow it to increase its team, evolve processes, improve the product/service, etc.;
- Time that is, having a set period of time to happen. For example, doubling the number of customers by the month of December 2020.
It sounds simple, but we often set unrealistic goals based on the desire to grow – which causes stress, work overload and a constant feeling of failure in the sales team! That’s why it’s critical to weigh the SMART aspects of your annual goal, as well as your quarterly and monthly goals.
An important point: a goal does not necessarily need to be linked to the value sold, to sales. You can also have goals for number of meetings or visits in Field Sales, and call time in Inside Sales, for example.
Especially in small and medium-sized companies, daily goals are essential for the operation. If that’s your case, don’t forget to break the monthly goal into a daily one, to assess whether it is, in fact, achievable.
Other Uses of Predictability in Sales
Predictability in sales as a management tool
In addition to serving as a basis for business goals, predictability in sales is also a management tool.
When doing operational planning, that is, breaking down goals into daily tasks for the sales team, you will have a list of to-do items that will need to be monitored and evaluated. The best way to control your business process is using a CRM, as we’ve talked about here.
The benefits of CRM are even greater when combined with active management rituals. Weekly, have a meeting with the Sales team to review the pipeline. During this meeting, evaluate how each salesperson’s week went, how many opportunities were received and worked on, what stage each negotiation is at and if there are any obstacles in the way.
With this information in hand, retrieve your sales forecast for the week and cross-reference the data. What needs to be done to ensure the goal is met? Which opportunities are most likely to close a deal? Is it possible to speed up these negotiations?
Keeping track of this weekly helps to verify that the forecast was done well and that everything is going as planned. These rituals bring followers closer to their leaders, facilitating people management and increasing the motivation of the team as a whole. After all, everyone feels supported to reach the goal.
Managers who present the month’s goal on the first day, and only talk to the team again on the 25th to understand why they are still far from what was expected, have a huge problem on their hands: lack of predictability.
Alignment with marketing
Another relevant point in this discussion of predictability is the importance of aligning the sales forecast with marketing efforts. We even recommend that the marketing funnel be built based on the sales funnel , in reverse:
- Based on the expected number of sales and the average conversion rate, define how many leads need to be generated in each period;
- Based on the average conversion of Leads to Opportunities, establish the volume of Leads and Qualified Leads needed;
- Adapt your attraction actions and marketing investments to generate this volume of Leads.
In the meetings with the commercial team, if we verify that few opportunities or low quality opportunities are coming, it will be the responsibility of the marketing team to find ways to accelerate its results so that the company achieves the objective.
Finally, another essential use of sales forecasting is for company financial projection! Use the forecast to map the expected revenue for each period and analyze this data considering the average churn (cancellation), default, discounts granted and factors that affect the financial result.
And speaking of discounts, especially in one-off actions, they need to have rules. Otherwise, salespeople may be inclined to always offer the discount to convince the customer to buy, but hurt the revenue or billing goal and affect financial planning for that period.
To learn more about this subject, check out our Corporate Financial Planning Guide, a complete resource to help you ensure your business is always in the blue!