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The Two Types of Sales Forecasts Are

What is sales forecasting and how negative sales forecasting can benefit your company

by stacy

The process of sales forecasting is an integral component of the job of any sales leader. When you are presenting your estimations, it is imperative that you provide answers to two very significant questions: how much will we sell, and over what span of time?

There are various methods at your disposal to forecast income for your company, and some people believe that sales forecasting is both an art and a science at the same time. However, if there is one thing that the epidemic has taught us, it is that game-changing events can appear seemingly out of nowhere and completely derail your forecasts for income.

When an economic downturn, a natural calamity, or even a pandemic takes hold of a region, confidence levels can quickly shift in both the business world and among consumers. These kinds of occurrences might have a significant impact on your sales projections and slow down the growth of your revenues.

In times like these, it is OK to shift your attention to empathising with your customers and working on strengthening the bonds you have with your employees.

Remember that your sales representatives and team leaders need to be given the authority to do whatever it takes to keep their customer relationships as strong as possible; once the storm has passed, you will need to gain knowledge about these robust relationships in order to grow and recover your business.

In these circumstances, your forecast might not turn out the way you expected it to, but it’s still vitally important. Your sales forecast is an essential tool for making plans for the upcoming months and years, so that your team can comprehend the following:

What goes into a sales forecast?

For a reliable sales forecast, having data that is both accurate and comprehensive is a prerequisite of the utmost importance. If you are just getting your firm off the ground, you might not have your own sales data yet. However, you can look at the trends in your market and make educated guesses based on those trends.

Your sales forecast will normally take into account conversion rates from first talks to concluded agreements. This is in addition to providing an overview of the pipeline you already have and establishing certain goals and benchmarks.

The following are some potential constraints on your projections of sales:

projections based on point-specific estimates and measurements, such as a sales objective, for example
Analyses of sensitivity concentrated on individual variables, such as seasonality.
Inadequate application of formal methodologies to stress testing
a lack of coherence between budgeting, financial forecasting, and strategic planning
How to create a pessimistic projection of future sales
A negative sales prediction looks at the dangers that are currently facing your company and suggests ways to avoid those risks. Methods such as the following are among the most frequently used when evaluating such concerns:

How to conduct a negative sales forecast

The transition away from single-point forecasting and single-input sensitivity and toward multi-factor views
Adopting the utilisation of quantitative distributions and the aggregate of individual volatilities in order to conduct an analysis of the spectrum of probable outcomes
In order to obtain a cash flow or earning distribution for each type and time, it is necessary to shock the financial and sales predictions with main risk factors.
Making it possible to cut down on the length of time needed for the cash flow cycle, which will allow you to be ahead of payments that are due to your company and lower your risk.
In its most basic form, this refers to the possession of numerous forecasts and models that take into account a variety of variables and offer the chance to construct a contingency plan in the event of stressful or emergency occurrences.

Key takeaways

When doing sales forecasting, it is imperative that external risk variables constantly be taken into consideration, even if they appear improbable or excessive. You can never tell! In order to construct a picture of the hazards that lie ahead that is both extremely detailed and diverse, you should also employ several sorts of modelling.

You will need a foolproof sales process in order to lessen the amount of danger that you are exposed to and to keep your cash flow stable. Download our convenient sales contract template to assist your sales staff in closing agreements more quickly than ever before and reducing the amount of time they spend on administrative tasks.

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