How wonderful would it be to predict the future with even the slightest chance of accuracy? Welcome to channel sales forecasting! Sales forecasting provides a Back to the Future foundation for leaders’ decision-making about business operations. It also directly impacts how leaders make informed decisions about their operations.
Although a channel sales forecast is just an estimate of projected sales using sales data, it is much more insightful than the traditional methods of tallying monthly, or even annual, sales data. The proof is in the pudding that businesses that forecast future sales numbers are more likely to grow sales than a company that does not. Channel sales forecasting keeps your sales partners’ eye on the prize, as it requires a particular focus to meet established goals.
Sales forecasting is a necessary evil for companies that operate with channel partners, for several reasons. For one, businesses can properly allocate resources based on sales predictions. If, based on data, your business is going to experience a burst in sales next quarter, you can be proactive and stock your inventory. Channel sales forecasting also helps companies manage cash flow. For instance, a business can estimate future costs and revenue and strategize accordingly.
Businesses can conduct channel sales forecasting on a monthly, quarterly, semi-annual, or annual basis. And just like everything else in the channel management world, sales forecasts can be kind of tricky. Do your research!
Here is a roundup of the various techniques for channel sales forecasting, along with the pros and cons of each:
This method is based strictly on predictions from your sales channel partners.
- Pros: Feeds off the insight and feedback of the boots on the ground team who actually performs sales.
- Cons: Salespeople tend to be overly generous when making predictions based on their performance.
Length of the sales cycle
A quantitative and objective method that considers how many deals your sales partners predict they will close based on an average sales cycle.
- Pros: An objective way of making predictions based on the numbers that do not require a sales channel partner’s feedback.
- Cons: Not the best method for new businesses or businesses with little-to-no data because it requires accurate data. And a lot of it.
Comparing month-over-month or year-over-year data to make predictions.
- Pros: A quick way to make a somewhat accurate sales forecast.
- Cons: Does not consider fluctuations in the market.
An all-in-one technique that incorporates several other methods, including the length of the sales cycle, intuitive and opportunity stage forecasts.
- Pros: Considered one of the most accurate methods of sales forecasting as it relies heavily on data analysis.
- Cons: Extremely complex and requires an extensive budget. It may not be an option for a new business or a channel where analytics are not optimized.
A prediction is made at each stage of the sale process.
- Pros: Much like the length of the sales cycle, this is an objective prediction based on the numbers, along with other variables.
- Cons: Same as the intuitive method. A subjective method that relies on the self-assessment of salesperson’s ability to assess their performance at each stage of the sales funnel.
A prediction made at each stage of the sales funnel, similar to the opportunity stage, but with data analysis and not just predictions from your sales channel teams.
- Pros: Similar to multivariable analysis, a highly accurate technique of sales forecasting as it relies heavily on data as well as insight from your sales channel partners.
- Cons: Time-consuming and sometimes costly as this method may require additional SaaS systems.
Values are given to leads based on the probability of conversion and then these values are used to make predictions.
- Pros: Lead values can provide rather accurate predictions of revenue-generating customers.
- Cons: Not viable in a fluctuating market with multiple variables.
Using a test-case scenario with a particular market to make predictions.
- Pros: Best for new products and startups to get market share.
- Cons: Markets are highly variable and predictions for one market may not apply to another. Also, can be costly because it requires multiple launches of products or services to make accurate predictions.
Lastly, to increase the accuracy of your sales forecasts, your sales channel partners need to:
- Set goals
- Outline the sales process
- Focus priorities
- Be proactive, not reactive
If you are in the business to grow, sales forecasts are the way to go (yes, that rhymed and was very intentional). They give you much more insight than the calculations you get from monthly sales, which will only give you a snapshot of how your business is doing at the moment, but if you want your business to experience noticeable growth in sales, you should consider sales forecasts