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What Is Sales Forecasting & Why Does It Matter?

My last blog shared six shocking statistics about sales forecasting—from the perspective of how poor sales forecasting health is today, as well as how much teams can gain with a mature sales forecasting process.

Having the right definition is the first step in distilling a blueprint for flawless sales forecasts. Understanding why sales forecasting matters is the second, especially during times of significant variability and change. 

We’ll explore both steps in this blog.

What Is Sales Forecasting?

Sales forecasting estimates a business’ future revenue based on products and services that will be sold to new and existing customers.

Sales forecasting accuracy is an important cornerstone of revenue operations, an increasingly important function within leading organizations that aligns sales, marketing, and customer success across the full customer lifecycle to drive growth and revenue predictability. 

Why Does Sales Forecasting Matter, Especially Now?

As efficient revenue operations garners attention from investors and the C-Suite, sales forecasting accuracy gains corollary corporate priority. A trustworthy forecast enables effective planning and resource allocation, so executive teams can effectively manage risk, course-correct, and achieve organizational goals. 

Still, today, more than nine in 10 sales leaders cannot forecast revenue within five percent of accuracy, even when as little as two weeks remain in a quarter. It goes without saying that flawed forecasts expose enterprises to a host of negative implications. These threats have only intensified in recent months with COVID’s black swan of volatility. 

93% of sales leaders are unable to forecast revenue within 5%, 

even with two weeks left in the quarter.

— Clari 

But even as revenue executives receive increased pressure to meet and exceed targets, forecast predictability remains difficult to attain. While sales forecasting technology—available as standalone products and as part of human capital, financial, and sales performance management suites—can significantly aid the initiative, such technology is only effective when paired with efficient processes, clean data, and well-trained teams. 

97% of companies that implement best-in-class forecasting processes achieved their quotas - compared to just 55% amongst those that did not.

— The Aberdeen Group

The effort generally rewards the challenge. Nearly 100% of companies that use industry-leading sales forecasting processes achieve their revenue targets, compared to just 55% that do not. These teams are also 10% more likely to grow annual revenue, and twice as likely to outcompete peers.

Want to learn more? Download our guide to Sales Forecasting in the Next Normal.

 

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