Why Sales Forecasting Will Be More Important Than Ever Going Into 2021

While 2020 has been anything but predictable, nobody knows exactly what 2021 holds. By taking a scientific approach to forecasting your sales, you can avoid potential problems with your KPIs. It’s time to shift your sales process to focus on the future instead of dwelling on the past.

Few businesses were left untouched by COVID-19 and the associated recession. After months of operating on the fly and pivoting in response to external events, companies face a new challenge: determining how to plot out their sales forecasts for the remainder of 2020 and all of 2021 while considering the question, “Can we weather another downturn?”

While the overall practice of sales is part art and part science, sales forecasting specifically has to be all science. Unfortunately, this is where many sales leaders go wrong. Predicting what will happen in the upcoming year based on what happened last year — or merely going with a gut feeling — might seem like an easy and fast way to project sales numbers. But now, with the added complexity of forecasting for an unknown future after COVID-19, using data and metrics is more crucial than ever.

The best forecasting method for sales begins with basing your numbers on key performance indicators (KPIs), also known as leading indicators. “Leading” refers to the fact that these metrics show you where you’ll finish in the future. Too often, though, businesses look at “lagging” indicators — the metrics for sales that have already happened. These indicators can’t offer insight into future performance because they can’t be changed. To most accurately predict sales, you have to look at numbers that can be dynamic and adapt with the markets.

Think of it this way: Imagine a professional baseball player who’s had a consistent career of batting over .300, with 30-plus home runs and 100-plus RBIs. Now, let’s say he got seriously injured and had to sit out most of last season. Would you be able to count on his previous performance to predict how he’d perform in the future? Not likely. Just as external factors affected his performance, COVID-19 has impacted countless businesses.

This is what we’re facing for the remainder of 2020 and 2021. For many business owners, what was once predictable is no longer certain. As a result, whether they’re looking at dynamic data or concrete data from times gone by will have major ramifications for their future success.

Outside Factors Impact Inside Performance

The aftershocks of the COVID-19 crisis will likely continue to complicate 2021 sales forecasts. Competitive threats, technological advances, and an increased regulatory environment always pose challenges to accurate forecasting. There are even more factors at play as the economy works to recover, including fluctuations in raw material costs and availability as well as in consumers’ disposable income.

Because these forces alter what is normally predictable, they make your KPIs less predictive. To address this, you’ll want to recalibrate your sales process to reflect a new environment and focus on the future rather than the past:

1. Embrace experimentation.
   Now is the time to identify what will predict future success in 2021. Use the rest of 2020 to try different sales methods, figure out what works in this sales environment, and pivot accordingly.
   For example, there’s a good chance face-to-face selling won’t be possible for the remainder of 2020 — and perhaps into 2021. If that’s the case, how do you need to change your sales process to allow for online demos or virtual selling? How will you train your sales team on these new processes? What will be the probability of closure at each of those new steps, and how will you measure that? To find these answers, you will have to experiment in 2020 and use that performance data to inform your 2021 sales forecasting methods.
2. Lock in your new sales process now — not in January.
   If you currently have a six-month sales cycle (prospect-to-client), you’re already behind. Wait until January, and half your year will already be gone by the time you introduce your new process. Keep in mind that your sales forecasting methods should focus on activities that happen at the top of the sales funnel, prior to a proposal.
   Document your current sales process with all possible steps that could take place. What is the probability of a closure for each? What is the probability you’ll get to a first meeting, and what percentage of the time does each activity turn into a sale? If you can’t answer these questions, your sales process isn’t built on the right leading indicators — and your forecast won’t be sound.
3. Ramp up your sales force.
   Seize this opportunity to audit your current sales team and approach. Will you need to identify new products, channels, or decision makers? Do you have the right people in place to do so? What training and reorganization will you need? Work with your leadership team to talk through these questions. Get your sales forecasting models fully fleshed out before presenting anything to the rest of the leadership team.

No one knows exactly what 2021 will bring. By iterating now to find your company’s new modus operandi and then determining what’s possible in this evolving environment, you’ll take the scientific approach necessary to forecast your sales for 2021 more accurately.

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