Your Sales Projections Are Wrong: The Biggest Mistakes Business Owners Make When They’re Projecting Sales

Posted 17 February by Barb Easter in Cash Flow, Entrepreneur, Small Business

Let’s be frank here, it doesn’t matter how profitable your business is or how amazing your business model/plan may be, if you don’t know what’s going on with your business’ cash flow you won’t survive.

Don’t believe us? According to a U.S. Bank study, 82 percent of business failure are due to poor cash flow management. Creating an accurate sales forecast lets you anticipate any and all changes in your revenue, helps keep your expenses in line and brings attention to items demand action from a new opportunity to any potential issues.

Yes, you can have a sales person who put a lot of effort into sales forecast, but let’s face it, most are running assumptions based on hunches. 58 percent of businesses have reported that less than 75 percent of sales close as forecasted; that’s huge!

Want to save your business from becoming part of the 82 percent? Here are some things to avoid:

Mistake #1: Letting a hunch tell you the “full” story

Being optimistic is key is business – it’s what drives us to keep trying, but being far too optimistic can be a very dangerous. Yes, you’ve been presented with this great new opportunity and the meeting went well, don’t assume that your company has landed the job because when you assume you make an ass out of (yo)u and me.

No sales projection is going to be 100% accurate, but when you base your predictions on data and actual behaviour, you will always expect something much more accurate.

Mistake #2: Living in spreadsheets

Unless you’re living and dying by the spreadsheet; entering every dollar earned and every dollar spent as soon as it happens, your sales projections are likely out of date. That spreadsheet will give you different versions of the truth as different people work with different numbers.

Spreadsheets are known for taking a lot of you time, requiring a lot of collaboration and often not giving you an accurate view of the state of your business. Somewhat automating the process with a sales projection software will not only clarify the state of your business, but will also give your sales time back in their week to generate more leads or closing more deals.

Mistake #3: Failing to determine your buy stages

All buyers go through their own stages as they move forward to making a purchase. It is crucial for the success of your business to clearly define the stages and then to identify their behaviours that indicate the transition from one stage to the other (ie. Asking for a demo or setting up a sales visit).

If you don’t define the milestones of their buying stage, your sales force won’t be speaking the same language with will fog up your sales forecast.

Mistake #4: Ignoring History

We’re bound to repeat history if we don’t sit down and learn from it; past performance is the best indicator in predicting how you’re future will look. Chances are, if you’re not a new business, you have a large amount of valuable data from past years’ sales performance to help indicate your future sales.

Find out how long it takes to make a sale, or learn more about your business’ conversion rates. These are powerful metrics to know as they can help you determine what to expect in a comparable forecast period.

If you start to notice that your forecast is significantly varying from your history, there has to be a reason for the variance. Has something changed significantly? If not, your past history is a far too important data source to leave on the wayside.

Mistake #5: Failing to align on key metrics

Does your sales team and senior management buy into the same metrics? If not, everyone will be measuring different metrics and coming up with their own forecast that will make sense to them, but not for the whole company.

Determine what key metrics are the most important to you and your business and ensure that everyone is on board with those metrics. Without this, forecasting will be a subject of debate.

May the forecast be with you

There you have it! Those are the top 5 mistakes we see businesses doing all the time.

Yes, we do have to admit that avoiding or correcting all these mistakes doesn’t guarantee 100% accuracy. But what we can guarantee is that avoiding these mistakes will help your sales projections be much more realistic!

Dryrun can help you take control of your cash flow, understand your business and plan for growth.

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