“Boss, I’m sorry, but the Acme deal isn’t going to come in this quarter. We are updating the forecast to close Acme next quarter.” Perhaps you’ve heard this before from your sales leaders. Or, you’re anticipating this news in the near future. This post is for sales leaders whose sales forecasting process might be broken.
Forecast accuracy is at an all-time low. Sales leaders have to rely on poor (or no) information to predict sales performance. Many sales forecasts SBI sees consist of 3 categories. They may have different names, but they typically look like this:
- Commit – We have a verbal or signature. The deal is “done.”
- Upside – We “feel” this deal is going to close this quarter.
- Long shot – This deal “could” close, if A, B and C happens.
When the quarter ends, you find deals pushed from all 3 categories. The forecast process doesn’t work properly.
When deals push, it puts strain on you and the organization. This is further complicated by lack of an explanation. Deals worth millions suddenly vanish from your forecast. Nobody can definitively answer why this happens. Reps and sales ops alike throw their hands up in frustration.
How can you fix your forecast?
Download the Forecast Management Case Study. Learn how a $35B company fixed its sales forecast.
3 Ways to Improve Your Sales Forecast
There are several things you can do to improve your forecasting process. Here are 3 best practices to help you:
1. Pipeline Management Process – A pipeline is different from a forecast. Consider pipeline as the inputs that go into your forecast. It should not just be active or open sales opportunities. It should represent your entire funnel. For example, inquiries, leads, etc. Without a complete view, how can you accurately forecast sales?
- Each pipeline phase should have a conversion rate assigned to it.
- What % of inquiries become leads?
- What % of leads become opportunities?
- What % of opportunities close?
If these inputs are wrong (or missing), your forecast will not be correct. Using “plug data” or “estimates” will not fix this. How can your forecast be accurate if the inputs into it are guesses? Instead, use either:
- Your own historical conversion rates, or
- Benchmark conversion rates
This may be a new concept for your sales organization. Using accurate information here will create better inputs into your forecast
2. Forecast Management Process – The forecast often represents committed deals. The review process is typically conducted via a forecast review call. Your sales leader and their reps jump on a call. They review and report on the open deals. Will deal A close this quarter? How about deal B?
This process is a cover-your-behind exercise. Reps give “gut feel” answers and sandbag deals to avoid persecution before their peers. Time is spent out of the field reporting information that proves useless.
To fix this, align your forecast process to the buying process of your customers. This gets accomplished through the use of:
- Buyer Personas – Focusing on the objectives, obstacles and important factors for those on the buying team.
- Buyer Process Maps – Using buyer-driven evaluation criteria to assess the status of deals.
Reviewing deals from the perspective of your buyer removes sales rep “gut feel.” It will improve accuracy and predictability in your sales forecast.
3. Sales Operations Courseware – Forecasting is a science, not an art. Many sales ops leaders are very good at analyzing data. They can create pivot tables with the best of them. When it comes to using processes to improve forecast accuracy, they often struggle.
To forecast effectively, your sales ops leaders need to be trained. Many have never had formal training for this role. Here are 5 best practices for enabling sales ops to deliver an accurate forecast:
- Charter – What is the mission and purpose of sales ops’ role in forecasting?
- Data – What data is needed to create an accurate forecast?
- Analytics – How should the data be analyzed to produce an accurate forecast?
- Reporting – How will forecast information be reported? When? To who?
- Systems – What systems should be used for the forecast?
These may seem simple, but they are often overlooked or cobbled together. It causes 11th hour thrashing and forecast issues. A well-defined process for sales ops will help improve your forecast accuracy.
It’s impossible to have a sales forecast that is 100% accurate. There will always be things outside of your control. However, you can take steps to improve your forecasting process.
Review the Forecast Management Case Study to see how one company did this. Try implementing the 3 best practices outlined here to improve your sales forecast.