This prompted me to ask: “How much time do you spend on Forecasting each week?” The reply: “Only 4-5 hours with my direct reports and 3-4 hours with the Chief Sales Officer.” Ugh.
This Sales VP spent one entire day on forecasting each week. That is 50 days per year (minus a two week vacation). Two full months a year spent on forecasting. How much time do you and your team spend on forecasting sales?
Greater than 75% forecast accuracy equals too much time spent on the forecast.
Do I coach my sales managers enough? Upgrade the talent on my team? Strategize on Winning Deals? Plan the vision for my region or team for next quarter or 6 months? Or waste valuable time on forecasting? Get the entire list of Sales VP Best Practices by registering for our Making the Number tour here.
The conclusion: Forecasting is eating up valuable selling time. It is distracting from asking how we will sell the deal vs. what we are going to sell.
We need a better way.
When forecasting your revenue for next week or month, first consider your pipeline. After all, it’s the pipeline that creates the forecast. Map the pipeline and forecast to the buying journey. How? Consider these metrics to change the process:
- Define Stage Exit Criteria: Map your Sales Process directly to the Buying Process and name Buyer Driven Exit Criteria. This will allow proper placement of the Deal which improves Pipeline Accuracy.
- Number the Opportunities/Stage: Deals by stage should look like a funnel. More in the early stages, less in the final stages. Does your funnel actually look like a funnel or more like a blob?
- Define Average Time/Stage: Do you track days in stage? This is a critical metric to not only manage the pipe but to manage your rep.
- Average the Phase Advance Rate (PAR): How many deals advance through the stages and at what percentage? Are they moving too quickly or not quick enough? The real question should be: How can I manage a pipeline if I don’t know the Phase Advance Rate?
- Determine Average Sales Price/Stage: Sales Price fluctuates by stage. Early stages are sometimes a guess where late stages are near exact. Don’t like averages? Then use real numbers. But calculate what the deal size by stage is. It will tell you what is here today and tomorrow.
The answer is to take these metrics and apply them in a worksheet based from your pipeline. Below is an extract from our client’s CRM called ‘Pipe to Forecast Worksheet.’ It has reduced the amount of forecasting time Sales Reps and Managers spend and transferred that time to Pipeline Management (A.K.A: Deal Strategy or Opportunity Management). It has moved this company from opinion based forecasting to fact based forecasting. Download a copy at this event.
This client no longer asks Sales Reps and Sales Managers to forecast. Each sales rep is responsible for accurately recording where each opportunity is in their sales process. Their Sales Manager reviews each individual sales rep ‘Pipe to Forecast Worksheet.’ The CRM rolls it up to a SM worksheet. The Regional Sales VP then takes their 8 sales managers and rolls up to the CSO. The forecast is accurate based on real time opportunities, can be drilled down to closely examine any deal and saves time. Our client got back over 35 days in one year. (Each sales person captured back 2 hours a week, each sales managers 2 hours per week and each VP another 2 hours per week=37.5 selling days).
Can you imagine what you would do with 37.5 extra selling days? Create a more robust Pipeline (which leads to a bigger Forecast)?
Call to action:
- Map the Buying Process to Stage Exit Criteria. Remember, if you don’t have a buyer centric sales process it can lead to 3x more time spent forecasting (plus you lose sales). And you will know immediately where to put a deal in the process.
- Initially estimate, and then historically track the Phase Advance Rate (PAR) for each stage. This is critical to allow the buying process to determine the pipeline and forecast. The velocity of each stage determines numerous actions: Is there a value prop? Are we doing discovery or simply pitching? Are we working on qualified opportunities?
- Program the CRM to complete the Pipe to Forecast Worksheet. Don’t waste time filling out another excel spreadsheet.
- Use the extra selling time to actual sell, coach, manage etc.
Actual selling time is decreasing and being replaced with forecasting time by your sales reps and sales managers. Stop the insanity with obsessive forecast accuracy. Send this post to your CFO and find a better way; email me directly on how I can help. Your sales reps and managers need it.