Sales forecasting through volatility
The global economic turmoil stemming from the novel coronavirus pandemic has suddenly cast a spotlight on contingency planning across the business. Practically overnight, leaders across industries and regions have had to quickly reevaluate cash positions, liquidity, and strategies to endure future commercial turbulence.
Even in a time of crisis, and despite many unknowns, it is possible to forecast sales and revenue trends. Population health and safety is currently the top priority. But business leaders must also focus on continuing operations where possible and pursuing sources of reliable revenue, so that they can help to ensure the economic stability of their companies and employees, and position their organizations to accelerate quickly when markets rebound.
Recent studies suggest that volatile economic markets have significantly jeopardized future revenue streams for businesses globally. Uncertainty related to the COVID-19 outbreak and the subsequent stay-at-home orders have rapidly softened global demand and resulted in near-term sales forecasts evaporating as much as 50% in many industries.
Why is this happening? One word: uncertainty. We all seek answers to the same questions: How long will this pandemic last, how deep will the financial impact be, and how quickly can we recover?
One of the most important actions commercial leaders can take today is securing the revenue line. Sales leaders need to determine where the organization is most and least vulnerable, when it comes to the revenue plan.
This process begins by meticulously analyzing the sales pipeline and inspecting its make-up across three core dimensions: size, shape, and contents.
Sales pipeline considerations
Size: This should vary by rep, but a general rule of thumb is Pipeline Size = Quota / Annual Close Rate.
Shape: Aim for linearity, not a funnel—remove unwinnable deals from your pipeline as early as possible.
Contents: Not every lead is desirable, and not every lead is winnable; accounts and prospects that fill the pipeline should align with corporate objectives.
Once you have the pipeline assessed, answering the following questions will be critical in securing short- and long-term revenue sources.
Key questions to ask related to current sales pursuits:
- Given recent disruptions, will the customers you’re focused on still be in a position to buy?
- Is the value proposition of what you are selling still impactful in these changing market conditions?
- Given any recent shifts in your organization’s go-to-market strategy, are these deals still desirable?
- Based on these assessments, are these deals objectively winnable?
Regardless of what happens in the coming weeks and months, one certainty is that global markets have changed. That is why it is more important than ever to balance external insights with internal assessments, particularly related to revenue plans and sales forecasts.
According to the April 2020 Gartner Top CRM Sales Technologies for the New Realities of Selling in the COVID-19 World, “Organizations that rely on predictive forecasting tools which do not incorporate third-party data signals for market intelligence into their models will be useless for revenue targeting. This is because they solely depend on historical data to feed predictive models, leading to distorted ‘business as usual’ projections.”
The economic impact of this pandemic will be harsh for many businesses, but it will also present opportunities. As business leaders, it is important to build contingency plans, prepare for the worst-case scenario, identify plans to optimally mitigate these near-term impacts, and work to position the organization for recovery.
The ripple effects of COVID-19 will also touch nearly every enterprise worldwide. A frank analysis of the sales forecast and how it impacts subsequent decisions across the business can help you accelerate out of the curve more quickly and set your enterprise up for a successful recovery.
|Join us for our upcoming webinar, “Finding Common Ground in Uncertain Times: How Sales and Finance Can Stay on Target,” to hear how cross-functional leaders achieve a better relationship between sales and finance to overcome uncertainty and uncover new opportunities to impact the bottom line.||Register here|