5 Sales Forecasting Metrics That Actually Matter

forecasting sales

In the classic business sales cycle, everything revolves around hitting your numbers at the end of the quarter. This tends to be one of the most consuming occupations of any company, and finding ways to improve can be very difficult.

 

It’s even harder if you aren’t monitoring the sales forecast metrics. Performance-driven executives know that setting up metrics tracking will help them report and manage the effectiveness of their sales.

 

This entails developing a trustworthy, bottoms-up sales forecast that can benefit every facet of your business, including higher order fill rates, lower inventory costs, and maximized revenue. According to research from the analytics company Right 90, firms that monitor sales forecast metrics see real, quantifiable benefits that might include a five-percent increase in revenue, 15-percent increase in accuracy of sales forecasts, a 20-percent reduction of inventory, and a 60-percent reduction in forecasting cycle time.

 

“In order to drive real business results with your sales forecast, the forecast process has to be structured, consistent, and followed,” says the Right 90 report. “The key decisions of determining how and when the forecast is captured, who scrubs and vets the forecast, what ongoing analysis is done on the forecast data, and which business decisions are driven from the forecast, need to be clear at entry level for departments engaged in the process.”

In other words, you have to have a clear policy in place and plenty of monitors to track procedures and execution. To carry out a successful sales forecast for your business, here are five of the top sales performance metrics to watch.

1. Variance

Sales Variance

Sales variance refers to the difference between actual sales and budget sales. Measuring this metric is useful for gauging the performance of a sales function.

It’s also great for analyzing business results, understanding market conditions better, and following trends that will lead to more sales. It’s also used to calculate how much a sales forecast has altered from the beginning of a quarter to the end, so you can track progress and create goals for the future.

To track the variance in your sales process, it’s vital to listen to your sales representatives. They can give you feedback on what’s working and what needs improvement.

You can also see how their performance either improves or degrades the sales performance from quarter to quarter. Check each rep’s deal activity to be sure his or her reports match the actual numbers.

2. Accuracy

Forecast accuracy as it pertains to sales involves comparing the projected forecast and any variance to the actual numbers reported during that period. This is arguably the most important number in any prediction, because it lets you know whether you can rely on the sales estimations in the future or not.

To improve this number, you can talk with your sales professionals and get an accurate report on when a deal will close and how much you’ll make from it. You can also analyze customer behaviors in order to identify whether they’re ready for the next stage.

When you have too many sales personnel and customers to reach personally, you’ll need the assistance of technology. CPQ software can be very useful here.

It takes away much of the guesswork in your sales process and reduces mistakes from human error. Through the automated processes of price quoting and product configuration, you can improve your sales forecast substantially.

3. Compliance

This metric derives largely from the participation of your sales team. They must submit an accurate forecast and closing dates for their prospective deals.

This typically goes down the line, with sales reps submitting to sales leaders, and sales leaders submitting to their appropriate executive until it reaches the top. Because there are so many channels to go through in order to develop clear forecasting numbers, it can get confusing and errors and inaccuracies will crop up.

This is another area where CPQ software can help. It aids in the automation of sales processes so reps can make more accurate reports. It also speeds up processes so the compliance chain isn’t slowed by sluggish reporting processes.

4. Pipeline Coverage

sales pipeline

As you know, the sales pipeline shows where the money is in the process. This is vital to monitor in sales forecasts because it shows when goals can be met and exceeded. Depending on your systematic pipeline makeup, you can create an optimal pipeline coverage ratio that fits the needs of your business.

Managing your pipeline so that it outputs the most accurate forecasts is a matter of finding the right metrics to focus on. “We used to focus on sales numbers as the sole metric,” Karen Ong, CEO of Language International, a Boston company that sells study abroad programs, told Inc.com.

“After talking to other entrepreneurs in the education space, we learned that the largest driver of lead-to-sale conversion is the time it takes to respond to a customer.... When we interviewed our sales team members, we found out that they were always prioritizing follow-ups over new leads.”

In this situation, monitoring the pipeline brought reduced response times at Ong’s corporation. It also doubled sale numbers. This can make a huge difference for a business of any size.

5. Linearity

Linearity is another essential metric to cover. It shows the average deals that have been closed during a measurable time frame.

This helps to generate more exact targets over a period of time, since sales tend to increase at the end of the quarter or month, as reps try to meet their goals. Close study of this data will show your company where it needs to invest more time, training, and resources into creating a healthier spread of sales for the entire quarter.

A shift in goals can help to accelerate this process, and encourage sales reps to keep their deals on schedule and continue to stretch themselves. CPQ software can also be useful for keeping all your sales team on the same page.

When the sales people have the same resources to speed up their processes, it’s easier to track performance and promote the timely closure of deals.

Use iQuoteXpress to Improve Your Sales Forecasts

At iQuoteXpress, we know how important accurate, timely information is for the sales process. It’s nearly impossible to close sales without it.

That’s why you need our CPQ solution. We can automate and improve your quoting process time by 50 to 75 percent, which will speed up your sales cycle and improve the satisfaction of your customers.

It’s much easier to maintain high-volume sales when you have an easy-to-use, accurate CPQ system in your back pocket. To try a free, no-obligation demo of our CPQ software, contact us today!