objectives
Forecasting lets leaders set realistic sales targets, create attainable and motivating quotas for sales reps, and gauge expected revenue, aiding in budgeting and spending decisions for the whole company. If forecasts are inaccurate, businesses may overspend (putting themselves in a risky spot), and set unreachable quotas (which is demoralizing for reps).
To understand why sales forecasting is so important to business health, think about two example scenarios: one with a car manufacturer and another with an e-commerce shop.
In the case of a car manufacturer, cars take a long time to build. The manufacturer has a complex supply chain to ensure every car part is available exactly when they need to build cars, so the number of cars available to purchase will meet demand.
They promise the numbers that their teams will deliver. Depending on the seniority of the leader, how they forecast varies.
Sales forecasts touch virtually all departments in a business. For example, the finance department uses sales forecasts to decide how to make annual and quarterly investments. Product leaders use them to plan demand for new products. And the HR department uses forecasts to align recruiting needs to where the business is going.
Even the best sales organizations need to shake up their sales process once in a while. Breaking your patterns can help you find new ways of crafting even more accurate forecasting.
Unpredictable events have an enormous impact on your sales forecast. Extreme weather or economic crises all dramatically change your forecast. What you thought you knew about expected revenue growth can be suddenly flipped on its head.