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Sales Revenue Forecasting Software: The Basics
Success in the business world means being able to plan ahead. Things like market conditions, consumer needs and interests, resource availability, operational efficiency, and sales cycles are always in flux. Being able to predict the behavior of markets and buyers allows businesses to adapt to new conditions and challenges before they even arise. Forecasting is what enables companies to survive and thrive in dynamic environments.
Data analysis technologies have revolutionized how businesses are run and what it means to be competitive. Organizations of all sizes have invested in analytic software solutions to track everything from opex to sales performance. These technologies have enabled companies to better locate, define, and engage with target demographics to boost sales and foster brand loyalty. They’ve also been vital in optimizing supply chain and transport networks, enabling companies to realize higher gross profit figures and divert funds to new projects and corporate expansion. Generally, data software has helped managers and C-level executives better visualize the way their businesses run, what their goals are, and how best to achieve them.
Most data analytic software compiles data to make it easier to measure productivity and visualize metrics and KPIs. The job of making decisions and planning/executing new strategies, however, still falls to upper-level management. This can be very difficult and demands a great deal of foresight and creativity.
This is where sales revenue forecasting software comes in. Unlike other sales software programs, forecasting software enables you to accurately predict the behavior of data in the future. Knowing ahead of time what things like demand, profit margins, and consumer base size are going to look like ensures that the right tactics and strategies can be deployed to take advantage of those trends when they emerge.
The best sales forecasting software helps you discover and capitalize on market and buyer behaviors before they occur. Finding the right tools for your business is important, so let’s look at how forecasting software works, what types there are, and how they can be most effectively utilized.
Sales Forecasting Tools: What Can They Do?
Sales forecasting tools are used to predict how much of a service a company is going to sell. Utilizing data about sales team performance, pipeline efficiency, operational expenses, market share, and other metrics, they can accurately gauge what future revenue figures will look like.
There are many different sales forecasting tools with nearly limitless analytic capabilities. Here are a few of the major applications of sales forecasting software and how they help companies succeed.
Conversion Probabilities and Pipeline Diagnostics
Forecasting software can examine the efficacy of your sales strategy by looking at data on mean conversion periods and probabilities for different types of prospects and clients. This information can be analyzed to determine the average profit to be expected from each type of buyer. With this, you can then make predictions about future revenue figures. Looking at conversion probabilities can also help in determining the efficiency of salespersons and teams. If conversion figures were dissatisfactory, a company can know to invest in restructuring and better training for its sales division in the future.
Programs can analyze the costs incurred for each sale and determine what percentage of gross profits they will account for in the future. Forecasting software can track the market price for raw materials to see how much it will cost to make a product. It can monitor prices for ad placement and commission rates for advertising partners. Wage levels, turnover rates, and promotions can also be accounted for to predict future employment costs.
Predictive technologies can also be used to assess rival businesses. Competitor sales figures and market shares can be fed into the software to determine their trajectories. Knowing this enables you to indirectly calculate your own probable sales figures for future quarters.
Budgeting and forecasting tools exist for many more applications beyond this, but these are a few of the most basic and important functions they can perform.
Demand Forecasting Software
Demand forecasting software, on the other hand, deals with predictions about the consumer end of things, namely, how much demand there is likely to be for your product in the future.
Demand forecasting examines probable trends in prospect and client behavior. Things like market penetration, funneling statistics, content and ad engagement, consumer needs and preferences, and competitor behaviors are all fed into a demand forecast calculator to generate key insights and help monitor patterns and trajectories. You’ll be able to determine which segments of your base will expand, which will contract, and by how much.
You’ll also be able to determine the causes of demand fluctuation and respond appropriately. If contraction occurs due to competitor strategies, you can focus on redesigning your ad campaign and differentiating your product. If it’s because of changing consumer needs and interests, you can do research to discover new prospect wells or determine what the next marketable trend/need will be. If the issue is price point, you can look at switching to suppliers with lower rates or considering redesign. If your software predicts an increase in demand, you’ll be able to plan for expansion and reinvestment in current strategies. Whatever the cause, you’ll be informed about it and be able to direct your focus and resources accordingly beforehand.
Demand forecasting is also vital from a budgetary point of view. Knowing what demand will be for your product in future quarters enables a company to work within projected budgetary parameters based on expected revenue. Managers and executives will be able to decide on which projects to approve, which to shelf, and generally how best to allocate funds. Demand planning can also help company’s prepare for a bad year if a product, the market, or the company itself is experiencing challenges.
Sales forecasts only tell half the story. To truly optimize data-driven decision making, demand has to be taken into account, too.
Sales Forecasting Software
Knowing now the benefits of sales and demand forecasting, what kinds of software are out there to complete these tasks?
Excel can be considered among a business’s basic forecasting tools because of its in-built visualizers where inputted data can be graphed to reveal patterns and trajectories. Unfortunately, data entry in Excel 100% manual. This means it’s a time-consuming process and vulnerable to human error.
A CRM software suite is more efficient and varied in the kinds of processes it can handle. CRM software can store huge amounts of data on clients, sales, funnel statistics, and more. All this can also be analyzed and visualized with inbuilt programs and dashboards.
Because all future decisions regarding sales ultimately revolve around questions of cost and profit, accounting software is also a vital component of forecasting. Cost analysis is important because it helps companies decide how to budget their resources in the future and which marketing and sales strategies to pursue.
Canopy, on the other hand, offers a dedicated sales forecasting software package which combines the visualization tools of Excel, the client analytics of a CRM suite, and the resource tracking of an accounting program. Specialized forecasting programs like Canopy can be considered the most powerful and versatile offerings in the realm of prediction solutions.
Building a Sales Forecasting System
Sales forecasting can be done with a single program or small bundle of applications, but a truly efficient sales forecasting system will be comprised of many types of software all working together to produce the best data-driven predictive models.
An effective forecasting system might have a CRM database as its foundation. Information about prospects and clients would provide basic data about reach, target demographics, sales cycles, and loyalty. Accounting software could then be used to determine the opex per sale and the profitability of different prospect segments and deployed ad strategies. Canopy could serve as a unifying nexus, able to compile and condense the data feeds and results from different programs, display them on dashboards, and offer key insights on KPIs and metric trajectories.
Other programs would also be beneficial in such a system. SEO analytic software could keep track of online traffic to your company site and the popularity of relevant keywords and phrases. Meteorological programs could track weather patterns which might affect things like transportation networks, consumer behaviors, and maintenance costs. Other programs could monitor supply chain health and keep track of materials costs and accessibility.
The size of your business and what it does will determine what kind of software is most beneficial to you, but having a streamlined and effective forecasting system is vital to future success.
Revenue Projection Software
One last category of forecasting is that of revenue projection. Revenue is the profit made by all sales once all other operational expenses are deducted. Annual and quarterly revenue are among the most basic metrics of a company’s success and have an effect on all other business decisions.
Revenue projection is also unique in that it relies most heavily on a different kind of predictive method: historical data analysis.
As opposed to other kinds of forecasting, revenue projection software will look more closely at data from past years to predict what a company is likely to realize in the future. This method can be highly accurate because of the larger amounts of quantitative information available from past years. What this projection software can’t account for is major unprecedented shifts in market or consumer behavior. The economic changes resulting from the pandemic, for instance, could not possibly have been predicted.
Forecasting is an integral part of business strategy and success. Building the right system and knowing how to use it to its fullest potential can make all the difference, and Canopy’s dedicated forecasting software is built especially to help you and your business thrive now and in the future.