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The Complete Guide to Sales Forecasting and Pipeline Management
RAIN Group
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The three primary reasons why forecasting and pipeline management are important are: Planning: Company growth plans, spending plans, inventory purchases, and investment plans are often decided based on revenue estimates, which largely roll up from sales manager forecast reports. Targeting: Company owners and stockholders typically hold executive leaders accountable for reaching revenue targets, and these leaders similarly hold sales managers accountable. Agility: For sales managers specifically, if you don’t know where your sellers’ pipelines are, and you fall behind, you can’t adjust during the year to change plans and influence seller activities to get back on track. What Is Sales Forecasting? Sales Forecasting Defined:Forecastingis the process of estimating future revenue in a given time period by predicting the sales revenue from your team. What Is Sales Pipeline Management? Sales Pipeline Management Defined:Sales pipeline management is a way to track opportunities that are actively in the process of considering buying. Top-Performing Sales Managers are 52% more likely to excel at planning and analyzing how sellers should manage their pipelines, according to a study conducted by the RAIN Group Center for Sales Research. When sales managers do this, they can more accurately forecast for themselves and their team. In ourTop-Performing Sales Manager model, which identifies the core roles that sales managers need to perform, Performance Management is next to Pipeline and Forecasting. This is deliberate as they go hand-in-hand. When sales managers have a sense of how strong a seller’s pipeline is, and they’re confident in how much each seller on their team is likely to sell, they can manage seller performance and adjust actions accordingly based on whether the seller is behind or ahead of target. What Are the Different Types of Sales Forecasting? Pipelines and forecasts are typically looked at over the course of quarters or a year. “Analyze and estimate new business that might come from accounts in the form of renewals, repeat business, or growth.” However, this data can be incomplete, inconsistent, or outdated, leading to inaccurate forecasts. For example, sometimes sellers or others involved in the process have personal agendas and styles that can lead to sandbagging: under-estimating likely incoming sales so they can seem to come out ahead, or over-estimating incoming sales, which can leave sales managers far behind when these sales don’t materialize, especially if the managers find out too late. Market volatility: Sales managers must contend with constantly changing market conditions, such as changes in customer demand, competitor activity, or economic fluctuations, making it difficult to accurately predict future sales. People factors:Sales forecasting is also influenced by the actions and decisions of individuals, such as salespeople, buyers, and executives. Changes in leadership, employee turnover, or unexpected buyer behavior can significantly impact sales forecasts. Limited resources: Sales managers may face limitations in terms of the resources they have available to conduct forecasting. Limited access to data, technology, or expertise can make it challenging to develop accurate forecasts. Resistance to change: Sales managers may encounter resistance to the forecasting process from their team members. Some sellers may view forecasting as a burden or may not fully understand its importance, leading to incomplete or inaccurate data collection. You need to be aware of the challenges involved in the process so you can address them where possible, and approach your forecasting and pipeline management activities in ways that help you achieve better outcomes and more accurate results. How Do You Accurately Forecast Sales? When pipelines aren't reviewed and stress tested on a regular basis by a sales manager, the pipeline can be full of dead wood.
Stick to what’s most important, but keep it positive so sellers feel like it’s a collaboration not an interrogation, and so they get to know your expectations. 7. Identify opportunities for Win Labbing, but don’t stop to Win Lab As you inspect opportunities, it’s natural to want to talk in-depth about how to win them. If an opportunity is important enough for a Win Lab, schedule one. If you do deal reviews during the pipeline review, you’ll run out of time to do the cross-pipeline review. 8. Consider swing deals When forecasting, it’s often a good idea to consider deals that, if they come in, will have an outsize effect on results. Any opportunity that is three times larger than average is likely a swing deal. At RAIN Group, we call these "whales"—big deals that give you false confidence in the strength of your pipeline. We keep these out of the pipeline to ensure we're not hinging our success on one opportunity that can make or break the forecast. 9. Estimate your “push to the right” and “bluebirds” Imagine it’s the beginning of the quarter and you’re estimating $5 million in new sales wins for the quarter. At the end of the quarter, almost everyone experiences: Sales that “push to the right” where the opportunity remains active, but the timeline shifts Sales “bluebirds” that you didn’t see coming that come in hot and close fast When forecasting the pipeline, ask yourself what percentage of deals forecasted for a quarter push to the right. Is it 10%? 20%? Whatever it is, plan for it as an average. Then consider how many sales happen during a quarter, or whatever time period you’re forecasting for, that come in fast and close during the period. These may be old proposals that went silent and suddenly sign, repeat business that closes fast, or new business that comes in with high urgency. Is that 5%? 10%? 20%? Whatever it is, plan for it. Subtract your “push to the right” deals and add your “bluebird” deals to arrive at the more accurate number. 10. “In addition, you can review the stalled list with your sellers to come up with a re-engagement action for each opportunity.” Set the foundation for focus and results with this complimentary toolkit.
The three primary reasons why forecasting and pipeline management are important are: Planning: Company growth plans, spending plans, inventory purchases, and investment plans are often decided based on revenue estimates, which largely roll up from sales manager forecast reports. Targeting: Company owners and stockholders typically hold executive leaders accountable for reaching revenue targets, and these leaders similarly hold sales managers accountable. Agility: For sales managers specifically, if you don’t know where your sellers’ pipelines are, and you fall behind, you can’t adjust during the year to change plans and influence seller activities to get back on track. What Is Sales Forecasting? Sales Forecasting Defined:Forecastingis the process of estimating future revenue in a given time period by predicting the sales revenue from your team. What Is Sales Pipeline Management? Sales Pipeline Management Defined:Sales pipeline management is a way to track opportunities that are actively in the process of considering buying. Top-Performing Sales Managers are 52% more likely to excel at planning and analyzing how sellers should manage their pipelines, according to a study conducted by the RAIN Group Center for Sales Research. When sales managers do this, they can more accurately forecast for themselves and their team. In ourTop-Performing Sales Manager model, which identifies the core roles that sales managers need to perform, Performance Management is next to Pipeline and Forecasting. This is deliberate as they go hand-in-hand. When sales managers have a sense of how strong a seller’s pipeline is, and they’re confident in how much each seller on their team is likely to sell, they can manage seller performance and adjust actions accordingly based on whether the seller is behind or ahead of target. What Are the Different Types of Sales Forecasting? Pipelines and forecasts are typically looked at over the course of quarters or a year. “This will give you a gap, which is the number of sales you likely need to generate from new sources, like sellerprospecting, inbound leads, referrals, or some other source.” However, this data can be incomplete, inconsistent, or outdated, leading to inaccurate forecasts. For example, sometimes sellers or others involved in the process have personal agendas and styles that can lead to sandbagging: under-estimating likely incoming sales so they can seem to come out ahead, or over-estimating incoming sales, which can leave sales managers far behind when these sales don’t materialize, especially if the managers find out too late. Market volatility: Sales managers must contend with constantly changing market conditions, such as changes in customer demand, competitor activity, or economic fluctuations, making it difficult to accurately predict future sales. People factors:Sales forecasting is also influenced by the actions and decisions of individuals, such as salespeople, buyers, and executives. Changes in leadership, employee turnover, or unexpected buyer behavior can significantly impact sales forecasts. Limited resources: Sales managers may face limitations in terms of the resources they have available to conduct forecasting. Limited access to data, technology, or expertise can make it challenging to develop accurate forecasts. Resistance to change: Sales managers may encounter resistance to the forecasting process from their team members. Some sellers may view forecasting as a burden or may not fully understand its importance, leading to incomplete or inaccurate data collection. You need to be aware of the challenges involved in the process so you can address them where possible, and approach your forecasting and pipeline management activities in ways that help you achieve better outcomes and more accurate results. How Do You Accurately Forecast Sales? When pipelines aren't reviewed and stress tested on a regular basis by a sales manager, the pipeline can be full of dead wood.
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