If you want to understand how to have a proper, useful sales forecast in place in your business, then this is the episode for you. If you have a B2B business and a CRM system, then this episode is all about helping you understand how to get a proper, meaningful sales forecast for your business.

Having a proper sales forecast is so useful. It helps you improve the accuracy of your cash flow forecasting. It helps you understand the risks and likelihood of your sales targets. It gives you time. It gives you visibility.

And if you don’t have a proper one in place, then you are guessing and hoping, and that is not the way to run a business. You can also explore more guidance on effective business thinking at Mind Your Own Business.

Why a Proper Sales Forecast Matters

So what do you need in order to have a proper sales forecast?

Well, if you have a CRM system, then it’s about using that CRM system properly. So many businesses have systems, but they don’t really understand how to get the best out of those systems.

So, for this episode, I’m going to share the key fields that must be used for every single opportunity, quote, or proposal in your business. And if you do this consistently, you’ll have everything you need to be able to produce a proper sales forecast.

So, let’s get started.

Using the Value Field

First of all, your CRM system will have a field for value. Most people tend to put a value on whatever their proposal, opportunity, or quotation. No problems there.

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Using the Probability Field Correctly

The next field that is essential is a probability field. If you have a probability field, then it needs to be used properly.

Some CRM systems populate the probability by default based on the stage of the sales process. 2% on first contact and 10% on second contact, etc. And it goes up depending on the stage of that sales process.

But for some of you, you’ll have the opportunity to override that or to just enter a probability. In my view, the best way of doing it is to allow the salesperson to make the judgment call on what the probability should be.

Now, I don’t think you need to make this complicated. 25%, 50%, 75%.

25% we’re not feeling very confident. 50% we’re not sure. We’re in there, but they may go elsewhere. And 75% is we’re feeling confident because we either know the customer, we know they’re not talking to anybody else, or there’s some other factor that’s giving the salesperson the confidence that they are most likely to get that deal.

If you can just keep it dead simple, then everybody knows where they’re at.

Sometimes I’ve worked with clients where you’ve got all of these random percentages, and it’s just people plugging in numbers without any thought. If you just stick to those three that I shared with you, everybody is crystal clear at all stages as to what those probabilities mean.

Using the Expected Close Date

So once the probability field is being used, then the next field that we need is something called the expected close date. Many of your CRM systems will allow you to put in an expected close date.

Now, when I start talking about this, the first thing that we get is pushback from the sales team.

“Well, I don’t know. How am I supposed to know when they’re going to make up their mind?”

Well, in my view, if you are a sales professional, it is your job to ask the right questions to get that information. Whether you get that information directly or indirectly depends on the situation.

You should be able to ask the customer when you need to decide this. But for whatever reason, if you can’t ask that direct question or you’re not getting the direct answer, then you should be able to understand what other information you need to get from that customer to make a judgment call on when they need to close that opportunity and make a decision and therefore when you expect that opportunity to be closed.

Bringing the Data Together

If you have the value, if you have a probability, and if you have an expected close date, you have all of the ingredients you need to produce a proper sales forecast.

All you need to do is either run a report on your CRM system or you need to export that data into a pivot table. And with all of that information, you have everything that you now need to produce a proper sales forecast.

Your CRM system may be able to run a report where it spits out all of the opportunities, the months along the top, and therefore the values that are expected to close in the relevant months that have been calibrated or adjusted by the probability amounts.

If your CRM system can’t do that, you can just export that information. So you’ll export all of the live opportunities into Excel, and you can run a pivot table that can produce the same result.

If you can do that, hey presto, you have a proper, well-thought-out sales forecast.

Improving Accuracy Over Time

Now, over time, your team will get better and better at getting the probabilities right. Over time, they’ll get better at getting the right expected close dates in place, and your sales forecast will become increasingly more accurate and therefore more useful.

The key here is that you must work with your teams to help them understand the importance of this information. The sales manager or sales director must be all over this, and they must make time to ensure that they are doing proper quality control checks on their CRM system, that they are producing these reports or that the reports are being produced for them, and then that they are properly reviewing this information.

It helps the sales manager manage the sales function properly. It helps the finance function have more accurate information to plug into their cash flow forecast. And it helps you, as the business owner, get the forecasting that you need and the reporting that you need to understand precisely what is happening in your business.

For more insights into performance and forecasting, you may find The Most Important Number for Understanding Your Sales Function particularly relevant.

Why Visibility Matters

Remember, in business, time is everything. The more visibility you have about potential gaps, not hitting targets, issues on the horizon, the more options you have at your disposal to fix those challenges.

So get this in place, and it will help you sleep at night and will help everybody in the business do their jobs better.

What You Need to Do Next

So, what do you need to do to get your sales forecast working better for you in your business? What bad habits do you need to help your salespeople break to help get this information out?

What do you need to do over the next couple of days to make sure that you’ve got everything you need to have proper visibility of how your business is likely to perform in the future?

See you next time on “Mind Your Own Business”.

You can explore more practical insights from Marco at Marco Soares.