How good is your forecasting?

Mastering the art of sales forecasting transforms your business from reactive to proactive, giving you power to anticipate cash flow, allocate resources efficiently, and make strategic decisions with confidence. This episode dives deep into the essential skill of predicting not just how many orders will come in, but precisely when they'll arrive.

We explore why forecasting matters so profoundly to business operations, revealing how it impacts everything from inventory management to foreign currency purchases. You'll discover how to recognize and adjust for the natural tendencies of salespeople – some perpetually optimistic about close dates, others consistently padding timelines. Understanding these personal biases proves crucial when interpreting forecast data, whether from your team or yourself.

The episode introduces a powerful, structured probability system that brings clarity to the often murky forecasting process. Each probability level (10%, 25%, 50%, 75%, 90%) corresponds to specific criteria about qualification status, budget approval, competition position, and purchase order progress. This framework eliminates guesswork and creates consistent, reliable forecasts you can actually trust. Plus, you'll learn about the rookie mistake that catches many salespeople – trusting a contact's assurance without verifying with the budget holder.

Don't miss our free one-hour webinar at www.salescrafttraining.com for three immediately applicable sales techniques. Whether you're managing a sales team or running your own business, the forecasting methodology shared in this episode will transform how you predict revenue, allocate resources, and ultimately grow your business with confidence and clarity.

Chapters

• 0:00 Why Forecasting Matters to Business
• 2:46 Understanding Seasonal Buying Patterns
• 5:43 Qualifying Clients for Better Forecasting
• 9:31 The Probability Rating System Explained
• 15:50 Applying Forecasting to Your Business
• 17:48 Key Takeaways and Resources

Transcript

Speaker 1: 0:12

Hello again and welcome to another podcast. So the question in this podcast, or for this podcast, is how good is your forecasting? And what I mean by that is how good are you at predicting when orders will come in, so not just the quantity, how big they'll be, but also when they're going to drop? Now, before I dive in, please remember to like, subscribe, give me some comments, give me some feedback. If there's something you'd like me to cover, let me know so I'll hand that over to you. So forecasting is really important from a business perspective because it gives you an insight into, obviously, when orders are likely to happen, how big they are, what they will entail. So all of these things impact cash flow. Obviously, it may mean that if you are, let's say, an importer and you're importing and selling equipment from somebody overseas, and you're importing and selling equipment from somebody overseas, you may also need to think about buying foreign currency if you have to pay in pound sterling, for example, the equipment that you're buying. So if you have an accountant or if you have somebody looking after foreign exchange purchases, it's really important to know when you might have to make big foreign exchange purchases to cover something that you're importing. Obviously, as I've said, it impacts cash flow. It may impact resources because, depending on what you're selling, you may have somebody else who has to go and install the equipment or set up a system or do whatever it is. So, or if you're selling something like cars, you may need to place an order on either the manufacturer or you might need to pull a car from the available stocking country, all that kind of thing. So forecasting is quite an important skill and I know from both having to forecast when I was a salesperson and then having to do it as a sales manager when I was having to interpret other people's forecasts it does develop into quite a skill. So if you are in a situation where you're managing people, one of the first things you will notice is that certain people tend to be quite optimistic about when orders are coming in and other people tend to be quite pessimistic about when orders are coming in. So it really is important to know which way to bias the information you're given based on who is giving you the information. So that's the first thing about forecasting. Now, if you're doing it for yourself, then obviously it is important, and if you are doing it as a business owner, if this is your own business, then it is really important to certainly understand or be able to read individual clients or individual prospects, I guess, until they place the order but also to have a feel for how the buying cycle, how the business cycles, work in your industry throughout the year. So what I mean by that is that it may be possible that every month you would expect to do the same amount, so you've got a pretty level buying pattern through the year.

Speaker 1: 3:46

The time of year doesn't change it. That could be, say, food related, something like that, but even then there's likely to be variations based on availability of food. Is certain food consumed more at certain times of year, like that? But even then there's likely to be variations based on availability of food. Is certain food consumed more at certain times of year? I've also spoken about this in the sales planning side, so this is another aspect of it. So do your clients tend to spend more at certain times of year?

Speaker 1: 4:15

If you are running a gym, for example, do you find you get a lot of people joining up just after Christmas, in the new year, and then they gradually tail off? Maybe there's a rush. When the summer months are approaching, people decide to get their sort of beach bodies sorted out. So this is an important part of understanding your business understanding how cyclical, how seasonal the purchasing patterns are, and that's kind of let's call it a strategic level. So that's the big picture. Then, getting down lower, at more of a tactical level, how can you read individual clients? So a lot of this will come down to qualification, which is one of the key things that I talk about, and to me it really is one of the most important things to get right, because once you understand how to qualify your clients, your avatars let's keep that term in the mix as well but once you know how to qualify them, then you will get most of the information you need in order to forecast when that business is likely to come in.

Speaker 1: 5:32

So the key question is understanding when they intend to buy Now. That may not be when they do buy. For all sorts of reasons. It may be they buy later. Maybe money isn't available, maybe something else comes up and the money that was planned to be used to purchase your solution has to go somewhere else. On the other hand, it may be that they do have a need that is fairly urgent and perhaps more urgent than they realize, and, of course, you can then create incentives for them. So I talk about closing techniques.

Speaker 1: 6:08

In the online training course, there's a free webinar which you should be able to find. It will jump onto my website. You'll find it there, wwwsalescrafttraining. Up onto my website. You'll find it there, wwwsalescrafttraining. And there's a free one-hour webinar that you can just jump onto. There's no giving emails or any of that kind of stuff, and I'll talk through three really important aspects of selling. So qualification is absolutely vital. You need to know do they have a real problem? Is the first one? Secondly, are they a good match for what you can provide? And then, thirdly, are they in a position to buy and what is the urgency?

Speaker 1: 6:50

The fact that they're talking to you may well indicate that there's a level of urgency, but it may not be straight away. So, for example, I've just gone through a process of getting international moving quotes because I'm going to be making an international move in the next few months, but I don't know when exactly. But I need to budget for it. So you could be dealing with people like that. So anybody I've been talking to who's starting to budget that business that I'm going to give them, they can quantify roughly because I've given them a rough idea of what I'm going to ship. But the kind of process they would go through is, once I've decided to go with them, they would come and do a survey of my home and work out exactly how much volume I've got or they've got to ship, how much I'm shipping to where I'm going, and then do do a costing on that. And then, of course, in terms of delivery because I'd like to see this stuff again fairly soon they will need to be able to give me some idea of when it might ship.

Speaker 1: 7:51

Now they may not know, because if I'm not shipping a full shipping container which I can assure you I'm definitely not they then have to work out how they're going to fit, get that on board a ship to head off somewhere else. So that's just an idea. To give an idea, I guess, of a real world example of a sales process. So I've spoken about those before. But obviously whoever's doing that needs to quantify me and actually stick me in their forecast for business somewhere. So if I was forecasting myself, I would first of all probably put myself out six months, because I've always found it better to be a tad pessimistic rather than optimistic.

Speaker 1: 8:39

So I would rather bring certainly a smaller order. I'm happy to let that, forecast it late and bring it forward, but go the other way. Obviously, if it's a situation where it's a large order and I've done this with government projects, particularly where we're talking about significant amount of foreign currency being purchased then it really is important to tie that down as much as possible. And what I would always do in that situation was sit down with our accountant and talk about what was going on and just keep them updated. So my process was, once a month as a general manager, in that particular situation, I would be running through how I saw the business going for at least the next quarter, certainly highlight any major purchases and then look at when it might be sensible to start thinking about doing a Forex purchase. So I'm not a Forex expert that's not my field but the accountant does know what's going on. So they're in a position to make their judgment call, but obviously they have to do it based on the information I'm giving them and that needs to be as exact as I can get it.

Speaker 1: 9:44

So, going back to this move, so mine is just a relatively small order and I can't give a precise date. I know it's likely to be in the three to six month timeframe. So that would definitely put it out. It's one to two quarters away. And so, in terms of have I chosen a person I want to go with just yet? No, I haven't, so that would drop the probability down.

Speaker 1: 10:09

So if we're looking at a probability with 100%, 100% probability to me is the order's in. So I never go better than 90%, but 90% is the order is in process. So again, this might be useful because I think different people have different way of rating where a particular purchase might be in the system and you may well have your own standard, but if you don't, this may help. So just working backwards, 100% is it's booked, 90% is it's in the purchasing process. So I know it's being signed, I know all the approvals have been met and it's now going through the formal sign-offs. But to my knowledge at least, there is at this stage no reason why this order is not going to happen. But so I've got to obviously 90%, a very high degree of confidence of not only that it's happening but which month it will be happening in. So normally you'd work on a monthly basis for forecasting 75.

Speaker 1: 11:09

I would generally rate that where I'm pretty confident about when the order will be placed. I know that we are the preferred option, but at that stage it's still going through formal sign-off, so I will early on have checked that budget is available. Ideally you want to be speaking to the budget holder and get their agreement, because as a young new salesperson I've fallen into that trap of letting my contact tell me everything had been signed off and everyone was going ahead. In fact you've got no authorizations at all. So this is kind of a rookie error. I should say we all make them, but we live and learn. So this is kind of a rookie error. I should say we all make them, but we live and learn. So this is how we learn to be good salespeople, I think by making mistakes. So 75%, pretty confident that there's a very good chance at this point that it's going to happen.

Speaker 1: 12:12

We are the chosen supplier. At this point I have verbal approval, or at least a verbal information, and maybe I've seen the budget holder that this is going ahead, but it's not actually just gone in. The purchase order hasn't been raised at this point. So once the PO has been raised, that's the 90%. That's the 90%, dropping that to 50%. This, to me is when we are still quoting. We are not the preferred, we've not been chosen yet.

Speaker 1: 12:36

So with the kind of stuff I used to do, that might be when we're at the demonstration stage. So at 50%, I know we're a good fit. I know that the client is serious, I know they've got budget approved, I know when they're likely to order, but a 50% is probably one to two months away. So this is another way of looking at it when you're forecasting and it's certainly how I used to do forecasting. So again, going back again, a 90% probability is this month, usually 75%. I probably put it in the following month just to give a few weeks for all the internal machinations to happen that have to happen.

Speaker 1: 13:14

50% again. This comes down to your buying cycle, because people might buy quickly, but you're probably looking at one to two months away and then, when you get lower than that, when you're in the 20% sorry, 25%. This to me is something that's been qualified. So I know that this person is a good client for us. They fit the avatar profile, but we haven't done anything to really close the sale off against competition.

Speaker 1: 13:46

There may also be a question mark over budget, so we may have moved further in terms of qualification. But if the budget isn't there, I tend to keep the probability down relatively low. Because if the budget isn't there, if you've gone through you had all the conversations everyone agrees you're the right solution, but they're not going to move for another three months or so, maybe even longer. The reality is that that shortlisting really doesn't stand for much, because by the time they come to make the purchase, there's a good chance something new will be out on the market or things might have changed. Somebody may have moved on or a competitor has been in to see them and you know they've got really excited about what they're offering. So there's a lot of areas of vulnerability there and so I would not rate something like that higher than 25%.

Speaker 1: 14:39

I've been going even lower, the sort of 10%. It's just something to me. That's something I've identified. I haven't really qualified it, but on face value at least they appear to meet the avatar profile. So they're the kind of company I want to be talking to or the kind of person I want to be talking to. But really I've got to go through. So I've done perhaps a quick phone verification, that sort of thing, to qualify them.

Speaker 1: 15:06

But I really need to sit down with them. I really need to get a very good feel, to confirm my thoughts about how good a fit we are. To just make sure budget's there, to make sure I know what the timing is. Is there anything I can do to shorten the timing? If it's a bit of a way out, is there anything I can do to shore us up against a potential offer from a competitor or that kind of thing? So those tend to be how I categorize my forecasting. So it is distinct steps. It would be 10%, 25% probability, 50%, 75, 90, and then obviously just put it to 100 when the order's in.

Speaker 1: 15:47

But I don't do anything more granular than that. I really don't see the purpose of it. I think there are too many variables, frankly, for having a higher level of granularity than that to make any sense. As I've said, things can happen. The person that you're dealing with might leave, somebody else may take over who has a different view. Maybe they've already got a pet solution in mind. So there's all sorts of variabilities that can come in here. So, again, something that's on a 10% is probably. It may not even be this quarter. It's likely that that will be the next, unless I know they want to move quickly, in which case, again, I prioritize visits, demonstrations, offers, anything else I have to do to get the order across the line.

Speaker 1: 16:38

So that really is, to be perfectly honest, that kind of veered off what I was planning to talk about how good your forecasting is. But you may not have done forecasting before, or you might not be very familiar with it, or you might not have any particular structure in your own forecasting process. So I offer this simply as one way of doing it. There are others. Other people prefer different things, but this is how I like to do it. But I think the important thing is to understand the importance of forecast and if you have your own business, you're probably a lot more tuned into it, because you're over your profit and loss, you know what your overheads are, you know when you need to see money coming in in order to keep the business viable. Basically, if you are working as a salesperson, it could be that you're not so aware of those other issues and you're not so aware of the importance of good forecasting and how it impacts the business. So I hope that's been a useful discussion for you.

Speaker 1: 17:42

As I've said, please like and subscribe. Please send me comments, any feedback, anything you'd like me to cover. And, as I've said, please take a look at the website wwwsalescrafttraining and particularly have a look at the free webinar. As I've said, it's just there. It's a resource you can make use of and there are three things in there you can apply straight away. So really, you've got nothing to lose but an hour of your time. Okay, that's it from me. I'll speak to you in the next podcast. Bye for now.