In Sales Forecasting, Speed Saves, Slowness Kills

In April and May 2010, Aberdeen surveyed 422 executives from a variety of different industries (i.e. manufacturing, healthcare, telecommunications), and the results were clear: Rapid forecasters (companies that collect and prepare reliable sales forecasts in less than half an hour) significantly outperform slow forecasters (companies that collect and prepare reliable sales forecasts in more than half an hour) in terms of their current and year-over-year performance in sales effectiveness.

This article highlights the key findings on how rapid forecasters boost the speed of their sales forecasts and achieve high performance.

Business Context

One of the pain/pleasure aspects of sales forecasting is the trade-off between the efforts it can take to produce a solid, accurate view of the sales pipeline versus the effort it takes a stakeholder to gather, calculate and publish the numbers. The amount and quality of effort put in to gather and utilize key information on the sales pipeline reduces the time it takes to produce accurate and reliable forecasts.

In analyzing the performance of rapid forecasters whose sales analytics automation allowed them to pull a reliable forecast in under a half-hour, data reveals that they consistently outperform slow forecasters in several key performance metrics.

Aberdeen’s research reflects that in order to support sales forecasting efforts, rapid forecasters leverage certain differentiators. Regular forecast reviews among sales reps and line managers is one such differentiator adopted 30 percent more by companies that forecast rapidly, compared to slow forecasters. Having such a “health-check” mechanism is crucial to decrease the possibility/risk of last-minute adjustments as well as to ensure further accuracy into the sales forecasts.

This differentiator becomes even more critical for companies with low levels of Customer Relationship Management (CRM) technology adoption; line managers and senior management in these companies have rather limited visibility on what will be going into the top line, and hence having such a process in place is indeed beneficial to reduce the risk in planning and managing the financial and operational balance of these organizations.

CRM and SFA

The use of sales forecasting/analytics software supports organizations in better managing the accuracy of their sales forecasts by automating certain processes that are otherwise manually executed and controlled. Given the impact of sales forecast accuracy on managing the financials and operations of business according to projections, even a small improvement in accuracy translates into significant monetary and productivity gains for organizations. Aberdeen research shows that users of this technology outperform non-users by more than 20 percent greater sales forecast accuracy.

Another differentiator — formal integration of forecasting workflow into (CRM) or Sales Force Automation (SFA) — is adopted 3.3 times more by rapid forecasters compared to others. The ability to feed relevant and timely information into the forecasting process through leveraging of existing data from CRM and/or SFA systems supports companies with timely and relevant business-related knowledge and enables improved sales forecasting accuracy. Aberdeen’s research shows that rapid forecasters are more likely than all others to have their sales reps spend at least one hour each day utilizing the existing CRM/SFA system(s).

In Conclusion

In today’s economy, being alert and actively managing business risks as they arise requires organizations to improve their visibility into the business as a whole.

Slow forecasters are clearly falling behind their counterparts, rapid forecasters, in the outcomes of their sales forecasting initiatives.

The actions highlighted in Aberdeen’s research report will help companies spur the potential improvements in generating faster sales forecasts along with improving visibility into the business overall.