If we could all predict the future, we’d all be billionaires. Or so the theory goes. In business, predicting the future is hard work, and only about 40 percent of B2B firms say their forecasts are effective. And 28 percent say their forecasting is ineffective. That’s practically one out of every three businesses! If forecasting is so iffy, why do it at all?
From one perspective, it’s better to have some sense of incoming revenue than none at all. After all, how else can a business plan capital expenditures, or even routine things like payroll? But what good is that if your predictions aren’t accurate?
Luckily, artificial intelligence (AI) can dramatically improve the accuracy of forecasts. And with better forecasts comes better business decision making. Let’s take a closer look at how AI can deliver better revenue predictions that support business growth.
Revenue forecasts are often based on subjective measures of the sales cycle. Specifically, when a company is forecasting revenue, it’s looking at what’s currently slated to be billed, what’s in the pipeline, and what’s the likelihood that each sale in the pipeline will be closed. In order to formulate a prediction, sales professionals need to determine the chance that each sale will close. And that’s where subjectivity comes into play. Some of it comes down to the sales associate’s experience and relationship with the customer, but some of it also comes down to their gut feeling and optimism about the deal (or lack thereof).
AI can actually remove this subjectivity by analyzing all past opportunities and identifying the factors that contribute to a successful sale. It can then assign a more accurate percentage based on data rather than intuition.
Crunching More Data
One of the biggest benefits of using AI in almost any setting is that it can crunch far more data than humans can. Revenue prediction is no exception. AI can not only look at the internal factors that contribute to a sale, but also many of the external factors. For example, if your company sells products or services to public companies, an AI system can take into account shifts in stock prices and correlate that to when opportunities convert. In fact, there are likely a host of outside factors that may impact a sale that aren’t even normally considered in most revenue forecasts.
Not only can AI crunch more data, but it can also do it far faster than a human being, even those with the most advanced excel spreadsheet skills. That means that not only can businesses use AI to get more accurate forecasts, they can get them more often. The result: a real-time or near real-time picture of business’ future. Essentially, AI can help businesses get the information and insights they need faster, therefore empowering them to make better, smarter business decisions.
If you’d like more information on how artificial intelligence can help your business improve its revenue forecasts, contact us. We’re happy to discuss the best way to get the most out of this emerging technology.