Bad-Forecasting

 

Nothing enrages a CEO like a quarter that completely misses forecasts.  One VP of Sales summed it up nicely: “It’s worse to not know the number than it is to miss it”.  But many sales leaders don’t have a clue until the final day.

 

Here’s the normal conversation:

 

CEO:  How is this quarter shaping up?

 

VP of Sales:  Uh…it’s going well.  We’re on pace, just need a few big deals to close out the quarter.

 

CEO:  Which is it?  Going well, or you need a big deal?

 

VP of Sales: Well, we usually get a few big deals at the end of the quarter.

 

These interactions do not give the CEO confidence.

 

The quarterly revenue number is critical for the CEO.  He must report on it every 3 months to the board and shareholders.   Today’s firms live and die by hitting revenue expectations. A few surprises and the CEO is gone.  Given this short term perspective, forecasting’s importance has dramatically increased.

 

If you’re the Sales VP, what can you do?  Don’t surprise your boss.  Download our Forecast your Sales Opportunities worksheet. Know where you are before the last week in the quarter.

 

Here are the three most common mistakes when it comes to forecasting:

 

1)      Mistaking the Pipeline Call as the Opportunity Improvement Call: Many pipeline calls are painful.  Sales Managers try to push deals into the forecast that shouldn’t be there.

 

“Why do you have your close probability at 30%? Put that at 75%”.  Of course, this doesn’t make the opportunity more likely to close. If you tell your managers they need to have a certain pipeline, you’ll get it. 

 

Instead, they should prescribe specific activities to advance opportunities, not change the score.  Here are some activity examples:

 

  • For late stage deals, ensure the rep has anticipated the most likely customer objections.  They should address these proactively.
  • Emphasize more prospecting activity when the top of the funnel is weak. Be prescriptive about How and Who your reps should prospect.
  • Identifying gaps in the current opportunities. Identify potential activities or information that the rep should’ve performed, but hasn’t. Ensure they follow up on these tasks.

     

If you mandate a specific pipeline above all else, you will get it.  Just don’t expect it to be true.  Don’t question the pipeline.  Question the activities and methods reps are using to build it.

 

2)      Mistaking Sales Activities for Buyer Indications: Many organizations tie their forecast to a poorly designed sales process.  In these instances, the “Sales Process” is a list of stages and steps based on rep activity. These processes are easy to recognize- they have stage names like “Negotiation” and “Proposal”.  Each time an activity is completed, the stage is advanced.  Each stage is tied to a specific close probability.  This leads to wildly inaccurate forecasts. 

 

Why?  Sales stages aren’t tied to buyer investment.  Presenting a prospect with a proposal does not mean they are ready to buy.  Instead, forecasting should be tied to a tightly defined series of buyer behaviors and criteria.  These factors should benchmarked and analyzed to determine close probability. 

 

For example, what close probability would you assign to each deal below?

 

  • The buyer has issued an RFP to the top 5 solution providers.  You are submitting a response to procurement.
  • The buyer is a current but frustrated customer of yours looking for an upgrade. You have been engaged early and often with their executive team.  They have asked for a proposal.

Using the rep activity-based stage forecasting method, both would have equal close rates. Under a buyer indication sheet, you’d get very different close probabilities.

 

3)      Poor CRM Adoption

 

Most companies that have forecasting problems have a CRM adoption problem.  Reps enter deals when they are close to the finish line.  They think that anything in the system will be hyper-scrutinized.  And they see no value in the CRM as a sales and forecasting tool.

 

This is a problem that starts at the top of the organization. The VP doesn’t understand the value CRM provides.  The result?  CRM becomes a massive reporting mechanism filled with lagging indicators.

 

A properly enabled CRM system eliminates almost all the effort associated with forecasting.  Dashboards are created to show deals near closure.  Buyer indications provide the forecast- not a rep.  The Sales manager walks through a simple report.  They coach each rep on their individual opportunities.  There is no “I haven’t updated it in the system yet” from reps. 

 

An accurate forecast is one the most important tools to manage your day-to-day business.  It is also one of the most important things to your boss.  Do it correctly.  Download our Forecast your Sales Opportunities worksheet.  Incorporate it into the CRM.  Have an answer for the CEO.

 

Have a question about forecasting?  InMail or connect to me directly @ DrewZarges

ABOUT THE AUTHOR

Drew Zarges

Helps small business owners overcome their biggest sales and marketing challenges to accelerate revenue growth.
Learn more about Drew Zarges >

Prior to joining SBI in 2011, Drew worked in the intermediary investment sales world. During that time, he worked his way up the ladder from client service representative to leading and coaching his former company’s sales team on the west coast. At SBI, Drew has served some of the company’s most prestigious accounts as a consultant. For these clients, he successfully executed everything from sales process and lead generation projects to highly technical account segmentation work. He now serves as the General Manager of SBI OnDemand, a unit dedicated to applying the firm’s battle tested concepts and projects to the small business community.

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