The start of a new year (especially that first few days back before it all goes crazy!) seems like the perfect time to take a moment to plan for the year ahead.
One invaluable item in the planning toolbox is a decent sales forecast.
Read on to find out what a sales forecast can tell you about 2020 and how you can create the ultimate sales forecast without ruining your new year break.
1. Are you selling fast enough?
Understanding your sales velocity is crucial. Firstly, it can tell you how your current pipeline is likely to convert into closed sales but it can also tell you how quickly you will add new deals to your pipeline.
At QuarterOne, we measure 3 sales velocity (‘Sv’) metrics:
- Deal frequency ( ‘Df’’)
- Win rate (‘Wr’)
- Deal value (‘Dv’)
- Time to convert (‘Tc’)
- Deal length (‘Dl’)
Using these, sales velocity is calculated by multiplying the first 3 metrics together:
Incorporate the last two metrics and you have a velocity-based sales forecast for new business (as explained in our recent blog post).
You can think of these five metrics as the levers you can pull to influence your sales forecast. Play around with the assumptions in your forecast to see where you could make improvements and what impact they will have. What if you added more sales resource to the team? Or do you need to improve the sales process to get deals closed more quickly?
2. Are you generating enough cash?
We all know that “cash is king” and being able to forecast cash generation from your customers is critical to understanding your financial position and ability to invest.
If your business wants a good cash forecast, start with a good sales forecast. Build in some simple invoicing and payment assumptions and, voila! The income half of your cash forecast is done, then your finance team can do the rest!
3. Which quarter should you be focusing on?
A sales forecast is a great way to help you decide which quarter you should focus on in January. It gives you visibility on where do you might have a gap or where might you have an opportunity to beat targets?
A gap in Q1 or Q2 might mean you can only afford to focus on deals already in the pipeline?
A gap further out, beyond the typical sales cycle, means you should be concentrating on lead generation or strengthening the sales team.
4. Do you have the resources you need?
Most businesses need to keep flexing their resources, including increasing or decreasing headcount. Sales forecasts allow businesses to plan ahead to meet the changing demands of their customers.
Your sales forecast should also help you work out where the resource focus should be. Are you more concerned about lead generation (marketing), time to convert new deals (sales process/management) or getting work started after a sale is closed (delivery resource)?
5. Who in the business needs help & support next year?
A sales forecast can be a great tool for effective sales team management and can help work out where the sales team needs help and focus in the new year.
By team, by individual or by channel, the clarity you can get by looking out 6-12 months and forecasting sales performance against targets can give you the lead time needed to identify any potential issues and put improvement plans into place.
Don’t just think about your sales team though. Your sales forecast should tell you which of your colleagues are critical to help you unlock a great 2020.
Is it marketing, recruitment or delivery that will make the difference? Work out who you need to invest time building bridges with. Why not book in some January meetings with your colleagues before you head off for your Christmas break?
A good forecast = A good plan
A good sales forecast is going to make your 2020 planning and focus so much easier. But how do you make sure you have a good sales forecast?
At QuarterOne, we believe forecasts should be data-driven. The best way to do that is start from your sales pipeline. Pipeline forecasting isn’t rocket science but our approach (which we like to call “enhanced pipeline forecasting”) combines basic pipeline forecasting with intelligent sales velocity modelling. Read our ultimate guide to sales forecasting if you’d like to find out more.
We also believe that preparing a sales forecast shouldn’t be a major challenge. A sales forecast should ideally be automated so it’s always up-to-date. That’s why we built QuarterOne and you can try our app for free if you’d like a better way to prepare your sales forecast.
Get Q1 off to a good start with QuarterOne! Try it now for free.