How do you choose variables for sales forecasting?

1 Understand your sales cycle

The first step in choosing variables for sales forecasting is to understand your sales cycle, or the typical length and stages of your sales process from lead generation to closing. Your sales cycle will determine the time horizon and frequency of your forecast, as well as the metrics and indicators that you will use to track your progress and performance. For example, if you have a long and complex sales cycle, you may want to forecast quarterly or annually, and use variables such as pipeline value, conversion rates, and deal size. If you have a short and simple sales cycle, you may want to forecast monthly or weekly, and use variables such as sales volume, revenue, and customer retention.

2 Identify your internal and external variables

The next step in choosing variables for sales forecasting is to identify the internal and external factors that influence your sales outcomes. Internal variables are the ones that you can control or influence, such as your sales strategy, tactics, resources, and activities. External variables are the ones that you cannot control or influence, such as market conditions, customer behavior, competition, and seasonality. You should select the variables that are most relevant and impactful for your sales operation, and collect and organize the data from reliable sources. For example, you may use internal variables such as sales quota, sales capacity, sales productivity, and sales performance to measure your sales potential and efficiency. You may use external variables such as market size, market share, customer demand, customer satisfaction, and competitive intelligence to assess your sales opportunities and challenges.

3 Choose your forecasting method and model

The final step in choosing variables for sales forecasting is to choose your forecasting method and model, or the approach and technique that you will use to analyze your data and generate your predictions. There are different types of forecasting methods and models, such as qualitative, quantitative, historical, predictive, and prescriptive. You should choose the one that best suits your data availability, accuracy, complexity, and purpose. For example, you may use a qualitative method if you have limited or unreliable data, and rely on expert opinions, surveys, or focus groups to forecast your sales. You may use a quantitative method if you have sufficient and reliable data, and use statistical or mathematical formulas, such as regression analysis, time series analysis, or machine learning, to forecast your sales.

Choosing variables for sales forecasting is not a one-size-fits-all process, but a strategic and iterative one that requires careful planning, analysis, and evaluation. By following these steps, you can select the variables that will help you create a realistic, reliable, and actionable sales forecast that will support your sales operation and growth.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?