Today's blog post is by Taj Mian, Managing Director, Canada, Board International.
Revenue growth is a key metric for all sales teams. In order to achieve consistent growth, sales leaders must create a revenue strategy that allows them to create and execute on reliable, accurate forecasts. Historically, most organizations relied on their managers’ experience and intelligence to manually create revenue forecasts. However, experience among managers can vary greatly from person to person, creating inconsistent forecast accuracy. Further, without data and analytics, it’s hard to identify where an organization is having revenue challenges, such as a need for more coaching, low pipeline, or low close rates. Each of these requires a different approach and focus.
Enter predictive revenue. Predictive revenue planning is a data-driven approach, which leverages historical sales data and forecasts revenue based on advanced statistical methods. Statistical forecasting has been around for a long time, dating back to General Motors in the 1930s. But today, powerful computing capabilities that can instantly calculate complex forecasts models based on massive amounts of detailed data are both ubiquitous and cost effective. A predictive revenue strategy can help sales organizations accelerate their revenue by incorporating more transparency and predictability into the forecasting process.
In this post, we’ll explore five key components of an effective predictive revenue strategy.
Clean, quality data
Predictive models rely on historical data to highlight deal archetypes and add intelligence to forecasts, so it is paramount to ensure that data is clean, unified, and harmonized. Bad data is a challenge for most companies. Products, customers, and channels are often defined multiple times across systems, with different IDs, making it nearly impossible to have a single source of truth on the organization. Simply put, bad data will result in bad forecasts. And without historical data, predictive models aren’t possible.
Accurate forecasting model
Most forecasting software will offer a choice of predefined statistical models, but it’s still important for sales leaders to have solid foundational knowledge of statistics and forecasting methods. Without this, it will be difficult to effectively interpret, question, and act on the forecasts. Knowing how the model works—and that it’s statistically accurate—is critical to differentiating the forecast from pure magic.
Implementing a predictive revenue strategy doesn’t mean that traditional revenue forecasts are obsolete. In fact, collecting both traditional and predictive forecasts over time will uncover accuracy trends that give management confidence in their predictive revenue models. Another component that organizations must consider is that creating a predictive revenue strategy is not a one-time event. There must be leadership willingness to frequently test, evaluate, and adjust the models to best fit the organization and its specific business needs.
At the end of the day, statistics aren’t perfect, and they require talented human counterparts to reach their full potential. An effective predictive revenue strategy is enabled by high-performing salespeople and leaders, who know when unique situations require the model to be tweaked, or when to make customer-specific exceptions to the rule.
A comprehensive platform
Implementing a successful predictive revenue strategy often means adopting a platform that brings all of the necessary data into one place. Sales leaders should look for platforms that are user-friendly and easy to understand, which increases the likelihood that salespeople will enjoy using. Built-in analytics can provide visibility into planning, budgeting, forecasting, and scenario planning with simple and actionable dashboards and workflows.
Overall, adopting a predictive revenue strategy is a significant undertaking that requires a long-term commitment from leadership. In order to be successful, organizations need to have the right data, models, expertise, people, and platform. With these components and a growth mindset, sales teams can consistently and reliably accelerate revenues.
To learn how Ricoh Group transformed sales performance across millions of sales activities with Board, download our case study.