Creating a sales forecast is a necessary evil of doing business. The higher-ups need to know what they can expect your sales team to achieve during the coming year. A sales forecast can be a dreaded aspect of managing a sales team. It can be drastically different from the real numbers and cause panic and lower morale in your team because of its unrealistic expectations. After all, no one can see in the future, so anyone making a sales forecast is simply guessing.

In order to avoid a dreaded sales forecast, here are some tips on how to make it more realistic so your sales team can be more confident, self-assured, and ready to meet its quotas without worry.

Tracking

The first step to getting precise forecast numbers is to continuously track your sales people’s efforts. This means keeping a tally of the leads they have generated, how long it’s taken them to move those leads down the sales pipeline, and how many leads they have closed, along with the dollar value of those sales. The more you know about your team’s past performance, the better you’ll be able to estimate its future performance.

Predictive Metrics

Using predictive metrics for your sales forecast can help you create accurate projections. By calculating the sales opportunities that have been generated, your team’s proposal ratio, the number of sales your sales people have actually closed, and the value of these sales, you can easily estimate with accuracy how your team will perform in the next year.

New Products

Trying to estimate a sales forecast for new products can be difficult. It can totally mess up your precision. After all, you don’t have sales numbers for that product for the past years, so you don’t really know how to predict how well it will do in the market.

A helpful tip is to project its sales based on a similar product. Use this older product’s sales history as your guide. Chances are you’re creating products or services that are similar to each other, so you’ll be able to base your projection with as much accuracy as possible. Of course, your new product could do much better than your old products, or it could end up being a flop, but you have to start estimating somewhere.

Outside Factors

The products and services you sell and your last year’s history aren’t the only considerations that must be factored in when creating a sales forecast. You’ll also need to factor in outside impacts. This can include shifts in your marketing or selling strategies, a change in your market, newly formed competitors, your budget, and your resources for the upcoming year. Sound market research, knowledge of the industry and internal processes, and good judgment will be your guides when it comes to considering these outside factors, putting a dollar number to them, and ultimately creating your sales forecast.

Pitfalls

For utmost accuracy, you need to avoid common sales forecast pitfalls. For one, being overly optimistic about your future sales can create unrealistic projections that simply can’t be done.

Additionally, ignoring your sales people while creating your sales forecast can mean you’re losing out on valuable information. Your sales reps are at the forefront of your business-they know better than anyone what their customers’ buying expectations are and which targets are realistic.

Not getting feedback on your projections, especially if you’ve been making a lot of adjustments, can lead you to have a sales forecast that’s full of contradictions, missing vital information, or was created with miscalculations.

Avoid Unexpected Losses with Accuracy

Sales forecasts are inevitable in business. They’re an important part of any business plan when it comes to effective company management. Creating a sales forecast that is as accurate as possible can help your company avoid any sudden, unexpected losses that will ultimately come down hard on your sales team.