Sales Xceleration Spotlight: Why Many Small Businesses Don’t Prepare a Sales Forecast

sales forecasting

Can you imagine not having any idea how much revenue your company will generate this year? This quarter? Next month? Large companies often use sophisticated reporting systems, utilize a documented sales forecasting process, and meet often to discuss current results and future revenue. However, that isn’t the case for most businesses with less than $10M in annual revenue. They typically don’t have even the most basic sales forecasting process in place. In fact, most small businesses don’t forecast future revenue beyond the end of the month. Why is that?

Most businesses generating $10M annually are led by an owner who typically doesn’t have an executive team – this means there is no executive leader solely focused on leading sales efforts. If the owner doesn’t have a sales background (most don’t), then he or she has not been exposed to an environment where a solid sales infrastructure and sales forecasting process is in place. Without a sales infrastructure, there is no insight into future revenue.

There are 3 basic reasons why many small businesses don’t prepare a sales forecast:

1. They don’t know when orders are going to be received.

That may sound hard to believe, but it’s true. Many small businesses don’t have proactive sales efforts, so all revenue results from existing accounts or when a new client reaches out to them. Many companies assume that the revenue they have “generated” in the past will be the same in the future. (You can quickly see the fallacy in that assumption.)

2. They don’t utilize a Customer Relationship Management (CRM) application to forecast future opportunities.

Over 90% of small businesses don’t utilize a CRM. Without a tool to track the progress of opportunities in the pipeline, there is no accurate means to track future revenue.

3. There is no defined sales process.

Most small businesses have not taken the time to document each step in their sales process. Therefore, all opportunities are viewed as having the same probability of closure. Everything being equal, we know that an opportunity at the “proposal” stage is more likely to close than one at the “initial meeting” stage.

Without the ability to understand the timing of future revenue, businesses can’t adequately manage future expenditures. After all, how can you decide how much to invest in your business when you don’t have a clue as to how much revenue will be generated?

Implementing a customized CRM, however, will help an organization monitor a sales pipeline, develop a reporting system and utilize a documented sales forecasting process. It provides the information to discuss current results and see future revenue months in advance. More importantly, a customized CRM shows the business owner what changes are necessary to reach the results they want and need . . . before it is too late.

The Bottom Line

Understanding your future revenue stream is not a “nice to have;” it is a “have to have.” The answer rests in building key sales infrastructure components to provide the insight you need.

Ready to learn more?  Reach out to a Sales Xceleration Advisor today.