Picture this: you’re responsible for organizing a complex set of travel logistics to get a scattered team of people to a remote location by a certain date. You need to book flights, trains, buses, connections… you need to figure out how all the moving parts fit together and make sure you leave enough leeway to allow for delays, cancellations and any other risks that could impact on your journey. You need to make sure everyone on the trip has everything they need to reach where they have to be, at the right time, without any disasters or hold-ups. You need to keep everything running according to plan.
Now, imagine you’re barely into the first leg of your journey when you discover that the train timetable you’re working to is more of a rough guide than a fixed schedule. That there’s only a 40% chance that any of your taxi transfers will actually turn up at all. That yes, your plane is taking off as expected, but it might land in a different city altogether.
How would you rate your chances of getting your team to your destination on time? How would you rate your chances of getting there at all? This level of pandemonium is not something you would accept!
And yet, when it comes to sales forecasting, too many managers accept this kind of chaos as inevitable. And they keep using the same flawed forecasting techniques over and over again – without ever getting better results.
Sales forecasting is notoriously inaccurate. On average, just one in four deals close as predicted. Statistically, that’s worse than flipping a coin. It’s worse than guessing. And that’s very, very bad news for your business. So how do you say enough is enough, and tackle the problem once and for all?
If you’re going to stop guessing and start forecasting, you need a strategic overhaul. You need to know the right questions to ask – and how to answer them.
Questions like: how do you purge bad opportunities from your pipeline? When does your management style destroy morale? Can a forecast even be accurate, except by accident?
To try and answer these questions, we’ve brought together the finest minds in the sales space to share their forecasting secrets.
Armed with these indispensable nuggets of advice, you’ll be monumentally better equipped to knock poor forecasting techniques on the head for good, interpret your sales cycle and draw out crucial insights to coach your team to success.
So what are you waiting for? There’s a goldmine of information down here – get digging!
[clickToTweet tweet=”27 Sales Experts reveal their secret strategies for accurate #sales forecasting” quote=”27 Sales Experts reveal their secret strategies for accurate sales forecasting”]
Let’s start here. The ‘Commit Theory’ of sales forecasting is completely broken. Committing that a deal will come in does not make it come in.
Accountability is good – but the misguided use of commitment is dangerous. It can be the enemy of good sales practice, and has the potential to alienate good sales people and damage customer relationships.
For sales managers to get accurate sales forecasts there are four basic things to get right:
- Know your team’s quota and current closed and projected (don’t like using the term forecasted) achievement against quota. Should be easy, but I am often surprised by how few companies do this well.
- Don’t allow for subjective forecasting. Implement a sales process across the sales team based on customer verifiable outcomes that indicates whether a deal should be forecasted based on specific evidence.
- Avoid Surprises! Make sure you have automated visibility into what changed in your key deals since last week’s forecast call, so you can spend time talking about what to do – not finding out what happened. Build in an early warning system to spot risks, highlight inactivity, deal slippage, or factors that might indicate that some of the key deals might be hard to win.
- Determine where to focus. Not all deals are equal and unless priority is given to the ‘must win’ deals to make the forecast and the quarter, the risk is that all deals will slip. Each deal in the forecast should be categorized as a ‘must win now’, ‘must develop for next quarter’ or ‘qualify out’ – so that you are laser focused on the deals in your forecast.
Donal is CEO of The TAS Group, author of Amazon #1 Bestseller Account Planning in Salesforce. His latest publication is Winning Sales Performance Management – No Analytics Needed. Follow him on Twitter, LinkedIn and on The TAS Group blog.
“The only way to improve the sales forecast is to review each opportunity.”
The only way to improve the sales forecast is to review each opportunity. The sales manager needs to test the opportunity to ensure that it is really an opportunity, which means the prospect has committed to change.
To improve the forecast, the sales manager needs to verify that the opportunity is progressing in line with the company’s sales process and also meeting the buyer’s needs.
Finally, no one like to look at threats, the things that might kill the deal, but an accurate forecast means taking into account what might go wrong.
But if you want an easier way to clean up your sales forecast, just delete any opportunity with a closing date of March 31st, June 30th, September 30, and December 31st. When salespeople use quarter end dates (or month end dates), it is an indication that the prospect hasn’t agreed on a date.
“Remove as much of the politics as possible.”
I have never seen (nor heard of) a sales forecast that was accurate, except by accident. The reason is simple: the politics of self-interest makes accurate forecasts virtually impossible.
How, then, to come up with an accurate, useful forecast? The key is to remove as much of the politics as possible.
Here are three simple strategies:
- Decouple forecasts from quotas. There’s nothing wrong with having sales quotas, but the time to talk about those quotas (and compensation) isn’t when you’re trying to come up with a meaningful projections. This takes some mental discipline on the part of the sales manager, who must resist the temptation to conflate the two activities
- Reward accuracy rather than penalize it. While there’s no question that the sales team should be able deliver the sales that are needed to make the company successful, the forecasting process needs to reflect reality, not wishful thinking. Shooting the messenger is dumb. What’s needed is “just the facts” attitude with rewards for getting the facts right.
- Remove the amateurs from the process. Part of the problem with the standard scenario is that everybody gets involved, bringing along their own, weird organizational baggage. Marketing, manufacturing, accounting and top management should react to the sales forecast, rather than drive it.
“It’s about establishing a culture of accountability, learning and collaboration.”
To improve the quality and accuracy of your sales forecasts, starting immediately, I recommend the following seven steps:
- Use consistent definitions. If your entire sales team is working from a consistent set of definitions (i.e. what is a good lead, what is a qualified opportunity, etc.), then it’s easier to trust the data you have. If you look historically at your conversion rates – overall, by industry, by geography, by rep – it’s easier to predict conversion rates and new sales from a future pipeline of opportunities. The entire sales & marketing team needs to understand these definitions, and sales management needs to enforce their usage on a regular basis.
- Know your sales cycle length. If you get a good lead today, when will it likely close? This week? This quarter? This year? Many inaccurate sales forecasts get this one piece of data wrong, meaning your conversion rates are accurate but don’t take place in the window of time you assumed. You eventually get the revenue, but not at the time your organization was expecting it. By building in a typical (or even conservative) sales cycle length into your model, you’re making it easier to map expected sales to the week, month, quarter or year in which they’re likely to land.
- Read market changes (and their impact on closing behavior). The model you build last year might not work this year. If market conditions are weak, sales cycle length may have spread out. If budgets are tighter, an earlier decision maker may need permission from the CFO to take action now. These changes can wreak havoc on your sales forecast if you don’t anticipate, identify and adjust both behavior and expectations as a result.
- Require a “compelling event” to become an opportunity. Is there something internally that is driving urgency and prioritization of what you’re selling? Requiring a defined “compelling event” for new opportunities may reduce the volume of opportunities created, but it also increases the likelihood that those deals will close, which in turn makes your forecast far more accurate.
- Conduct regular deal reviews. Sit down with your sales reps and walk through their pipelines. Not just names and numbers, but context. Ask for the back story, why they’re qualified, what the compelling event internally is that’s driving action. This isn’t about not trusting your reps. It’s about establishing a culture of accountability, learning and collaboration.
- Make updating the forecast fast, easy & mandatory for your reps. Most reps don’t want to make these changes to opportunities in their CRM system, as that may imply weakness in their own pipelines and selling skills. So make it easy and mandatory to make these changes in real-time. Make it clear to the sales organization that these changes will help management improve selling conditions, and address real-time changes with the resources needed to close more business.
- Reward accuracy and honesty. Create incentives for your reps to accurately forecast their expected sales. Foster an environment where honest changes to forecasts, even if the news isn’t good, is encouraged and rewarded.
Matt is President and Founder of Heinz Marketing. He has been repeatedly listed in the Top 50 Most Influential People in Sales Lead Management and the Top 50 Sales & Marketing Influencers. Follow Matt on Twitter and check out his blog here.
“A good lead is different for different markets and different products.”
Clarity of Definition. One simple point is do a better job providing the reps with what constitutes a “good lead” – and keep refining that definition over time based on feedback. Here it important to remember that a good lead is different for different markets and different products. This is particularly important in markets that are going through disruptive changes e.g.healthcare because the criteria for a good lead is changing.
Training. Managers should encourage the training department to develop training experiences in identifying and qualifying leads. It is rather shocking how little training is going on in these areas. A specific example is launching new products which should include training for what constitutes a good lead for that new product – seldom happens.
Coaching. Identifying and qualifying leads is a skill like any other sales skills and should therefore be one of the skills integrated into a manager’s coaching efforts.
Pipeline management. Managers should have strategic review sessions with reps about managing their pipeline since it is important to not only do a better job getting it right in the first place but also when and how do you know that a lead in the pipeline is stalled and should be eliminated.
“A pipeline does not equal a forecast. ”
Every step of the sales process should be weighted and reweighted as the sale progresses. For example, early on in the sales process, like the first meeting or initial presentation, the forecast should have a 25% win probability. As the salesperson moves through sales process, assuming each subsequent step requiring a bigger commitment from the client, then the probability of winning should be increased.
Let’s assume this is a B2B sale. If the salesperson has met the client, presented, and the client has agreed to do an product field trial, the probability of winning goes up to say 65%. But that doesn’t mean the deal should now be included in the forecast. No! When the field trial is over, a successful report has been generated by the client, and budget allocation is confirmed should this deal get an 80% or higher change (probability) of winning. Then, and only then, should the manager include this deal in the forecast.
By setting a high standard for what goes into the forecast, the manager reduces the margin of error (i.e., lost deal or no decision). Bottomline, all deals should be included in the the pipeline, but NOT all deals should be included in the forecast unless it passes the 80% or higher watermark. Managers need to review a salesperson’s pipeline to determine what they’re working and then ask to see the forecast which should only include deals that have an 80% or better probability of winning. A pipeline does not equal a forecast and that may be why only 46% of forecasted deals are won; because they never should’ve been included in the first place!
Sidenote: Some sales managers knowingly include deals with lower than expected probabilities of winning because they accept without challenging the salesperson OR they’re trying to protect (justify) their jobs by making their forecast look bigger.
DAVID MEERMAN SCOTT
“Let salespeople do their jobs.”
Obsessing over sales forecasts and having sales managers focus on “managing” salespeople to forecasts is exactly the problem. It is why salespeople are less effective today. So the premise of your question misleads people to failure.
The sales cycle is no longer. Now it is a buying cycle because potential customers have near perfect information on the web.
They can see what your company is up to, how your products work, what the competition is doing, how much others paid for your services, what your CEO is saying on social media (or not), and much more.
A micro-management of salespeople and detailed obsession on forecasting via CRM and salesforce automation systems leads to failure because those systems were built and the algorithms developed in the old days of selling. As soon as you worry about forecasts you’ve lost.
Instead, focus on the buyers and their problems and let salespeople do their jobs without interfering and forcing them to enter ridiculous amounts of data into your CRM systems and salesforce automation software.
“Teaching, training and showing metrics will enhance forecast accuracy.”
There are several actions sales management must perform to improve forecast accuracy.
- They need to track forecasted values vs actual sales production for up to 4 months without telling their reps, then in a sales team meeting the sales manager should share the results with everyone. This report should be graphed and become a monthly shared team metric. Salespeople pay attention to what is measured.
- The sales manager should also change the terminology, changing forecast to commitment, they then need to teach what the word means.
- The sales manager should then stress each week what we call our “ 10 magic questions”, essentially stronger qualifying questions. I the salesperson cannot provide answers to each of the questions, the account cannot be forecasted/committed. We see many sales managers not focused on account qualification when sales quotas are missed.
- Next, instead of letting CRM provide an % of probability of close, the sales manager should ask each salesperson “what % of probability will this account close this month?
- If the sales manager sees the “estimated close date” the last date of the month, then they should go back to #3.
Teaching, training and showing metrics will enhance forecast accuracy.
Ken wrote the Your Sales Management Guru series, which valuably address time management and a variety of challenges the first time sales manager faces. Follow him on Twitter and check out Acumen Management Group’s website here.
“Forecasting begins with setting quotas.”
Forecasting begins with setting quotas. Most companies use a top down approach which is a recipe for failure.
Quota setting often seems like a tug of war. It doesn’t need to be. Successful companies move from a mindset that’s based on unilateral control (top down) to a mindset of mutual learning. Mutual learning is all about being curious, taking other people’s ideas and reasoning into consideration before making a decision. When managers treat experienced sales executives like children, they will behave in immature ways and either find another job, or disengage emotionally from their company – going through the motions instead of contributing to the company’s success.
To help your salespeople make quota use a data driven approach that tracks internal and external data. Sales operation can help you analyze the past, but you can’t drive a car by looking into the rear view mirror. Marketing can help you segment data by industry, by geography and Finance can help you look at the margins and profit contributions.
There are a number of new software programs on the market that can help you move from diagnostic analytics to predictive and prescriptive analytics that will help you transform a reactive sales organization into a predictive sales organization. According to CSO Insights, Level 4 companies are able to improve quota attainment from 48% to 75%. There a many new best practices available that can help you move up to a higher level of awareness of so you can make far greater decisions so you can lead your team to a much higher level of forecasting accuracy.
You may not achieve the holy grail of 100%, but you can implement better practices, rely on better data technology and embrace a mindset of mutual learning to empower, encourage and educate your salespeople to achieve quota busting results.
“Potential, not history alone, should drive forecasts and sales activities.”
Answering this question fully requires candidly acknowledging five underlying issues. Though generalized, these issues apply broadly and have been accepted for far too long. Organizations that hope to improve the accuracy of sales forecasts should start here.
- Sales Managers must rely on others who never received training in forecasting. Bad practices proliferate. Sloppy shortcuts abound. Guesswork is the norm. In most sales organizations, there are few (if any) strong and consistent forecasters. Who can pass along knowledge if no one has it? And, despite the abundance of CRM, pipeline and automated forecasting tools, accuracy still depends on Sales Rep input. Who’s teaching them to accurately and candidly assess what’s in the pipeline? More often than not, random projections are made without the rigor required to produce the optimistic hopes behind reps’ projections.
- Sales Managers look back instead of looking ahead. Looking at last year’s numbers and tacking on a percentage increase is not sound forecasting (nor is it sound budgeting… but that’s a separate rant!). In one-on-one meetings with reps, Sales Managers frequently spend too much time talking about past performance and results that can’t be changed. Allocating more time to planning for future success and mapping out the steps to get there improves results, longer-term planning and the ability to accurately forecast. Looking ahead to understand client budgets and market conditions is also a wiser approach – potential, not history alone, should drive forecasts and sales activities.
- Sales Managers shy away from math, tools or formulas that seem complex. Sales Managers are usually former Sales Reps. Although there are exceptions, most Sales Reps haven’t made this career choice because they love calculations, data analysis or plotting sales cycles. On the contrary, these are activities that many sellers dodge. When they move into a Sales Manager role many are expected to tackle even more of these activities with more variables and for more people (their direct reports). Sans good training and systems, it’s an unrealistic expectation.
- Sales Managers don’t understand the importance of an accurate forecast. It’s alarming to note how many Sales Managers lack basic business acumen about their entire operation. Many don’t understand the cause-and-effect: If sales doesn’t hit revenue targets, expense cuts will be made to reach the budgeted profit margin. Inflated forecasts jeopardize jobs. Sandbagging on forecasts constrains resource allocation and forces too few people to do too much work processing more orders than were anticipated. Without a broad understanding of the impact, Sales Managers may not take sales forecasting seriously enough. Sales Managers are consumed with too many extraneous tasks that don’t drive sales. How much time should a Sales Manager spend on forecasting and the activities associated with generating an accurate forecast? Chances are that there isn’t enough time in a Sales Manager’s day to squeeze in the analysis and intelligence gathering this activity warrants. Instead, the typical Sales Manager is consumed with putting out fires, training, marketing, customer service and other work that interferes with driving sales. (More about this can be found in the LinkedIn article I posted on September 1, 2015.) Forecasting, already an undervalued and uncomfortable task, gets put on the back-burner and eventually is done haphazardly.
To improve the accuracy of their sales forecasts, Sales Managers need support from others. They need training on how and why to generate accurate forecasts. Sales Reps do, too. While some Sales Managers figure this out on their own, the strongest sales organizations equip their managers and reps with tools AND training.
Deb believes in “Putting People First”. She wrote the Discover Questions book series and founded People First Productivity Solutions in 2006. Follow Deb on Twitter and read the Connect2Lead blog here and the Connect2Sell blog here.
“The key to forecasting accurately is to know how and where these other influences are occurring.”
A major part of forecasting accurately is identifying your headwinds and factors that will work against you in the sales process. No one argues that.
But now, every step of the buying process is affected by the web – either positively or negatively. According to the Acquity Group’s B2B Procurement Study, 94% of B2B buyers research online while purchasing.
Either you are gaining the customer’s attention and trust via your digital impact, or your competitor (or some other distraction – such as a negative customer review) is stealing sales from you. Your top competitors are using the transparency of the internet to find prospects, and judge their interest and expectations so that they can offer the right sales messages at the right time.
The key to forecasting accurately is to know how and where these other influences are occurring. Fortunately, the same web that makes selling tougher and less predictable can also make it more manageable. Facts can be uncovered. Truths can be revealed, including those that show where customers are, what they are thinking about, how they are looking, what they are responding to, what messages are working, and the types of information they gravitate towards while making a buying decision. This information can plug the sales leaks and bring new clarity to the sales process.
Kristin spent several decades as a revenue coach to CEOs and entrepreneurs. She is co-founder and president of Cloud Potential LLC and the Cloud Era Institute. Connect with her on Twitter and visit her blog here.
“If you don’t know what you’re looking for, you’ll inevitably miss something important.”
The sales forecasting challenge is real. Research by CSO Insights shows that less than half of all forecasted sales opportunities close on the date and at the value forecast by the sales person. Just like the weather, a certain amount of variability in a sales forecast is inevitable – but getting it wrong more than 50% of the time ought to be unacceptable.
In complex sales environments, we’re dealing with complex human behaviours. And the reason why sales forecasts are so inaccurate is usually because our understanding of the dynamics of the prospect’s buying decision process is incomplete. Too many salespeople rely on hope when they (and their managers) ought to be depending on evidence.
The default behaviour of most CRM systems – assigning the same probability to every deal that is at the same stage in the sales cycle – is equally unhelpful when it comes to accurate sales forecasting.
In my work helping clients to deal with their forecasting challenges, I’ve found that two factors are particularly important in improving forecasting performance:
- Building an accurate understanding, verified by evidence, of where the prospect is in their decision-making process and what steps they still need to take before they are ready to place an order on a supplier
- Developing an accurate assessment, verified by evidence, of how well positioned we are with all members of the buying decision group in comparison to all the other options they are still considering – including “do nothing”
Sometimes prospects are prepared to tell you. Sometimes the evidence is clear. Sometimes you need to look for indirect evidence of where they are in their process and how well they regard you. But if you don’t know what you’re looking for, you’ll inevitably miss something important.
So here’s what sales managers can do:
- Redefine the stages of your sales pipeline to reflect the key stages in your prospect’s typical decision-making process, and only promote the opportunity from one stage to the next when verifiable progress can be observed
- Identify the handful of key factors that most strongly influence your competitive position (these typically boil down to 5-7 key elements), insist that your salespeople evaluate every opportunity in a structured fashion, and use this as a much more accurate basis for calculating your probability of winning
The most effective sales organisations are far more effective forecasters than the no-better-than-a-coin-toss average suggested by the CSO Insights data. If you adopt these two principles, your team could be, as well.
Bob is the founder of Inflexion-Point Strategy Partners, and is regarded as one of the UK’s most respected sales performance improvement experts. Follow Bob on Twitter and check out the Inflexion-Point blog page here.
“The sales team is founded on process.”
The challenge with studies like this is that there isn’t a universally-approved method for forecasting deals. Every company has its own way (or no way) in which forecasting is handled. That said, there are two opportunities for sales leaders to improve forecasting.
Recently, I was talking with a B2B client that had sixty salespeople. I asked this executive, “If each of your salespeople told you they just had a great meeting, what would you know for certain took place?” His answer was that he had no idea. They had not defined the criteria for a great first meeting. Defining that portfolio of desired first meeting outcomes is a first step toward improved forecasting.
Then, there is the exercise of forecasting deals in the pipeline. Many companies simply use percentages to forecast their deals without defining them. That means, if you had ten salespeople forecasting deals at a fifty percent chance to close, each would have their own definition of “fifty percent.” That means the company-produced forecast is completely meaningless. Thus, the next step is to define the criteria for each forecast stage so that the entire team uses the same methodology.
Taking these two steps will help sales leaders better predict results (and troubleshoot sales issues) because the sales team is founded on process.
Lee wrote Hire Right, Higher Profits which is both a best-seller and the #1 rated sales/sales management book on Amazon. Clients say he has a gift for architecting sales success. Connect with him on Twitter and visit the Sales Architects website here.
“Have a defined and documented sales process IN WRITING.”
Ahh, the age old question. How to improve the accuracy of sales forecasts. Sales leaders, CEOs, CFOs, CROs, investors, and anyone else interested in running a predictable business has struggled with this ever since I started to pay attention. (And I started paying attention a long time ago, by the way.)
I remember, it was the day I assumed my first sales leadership role. Previously, I tended to be part of the problem. As a sales guy, I forecasted by using my gut feelings mostly. I walked through my sales process sure, but it was based on my feelings and my conversations, much more than solely metrics. Yes, I was that guy. The sales guy that made sales managers a bit crazy, they were never really able to promise management more than “don’t worry, he will make it happen, he will get to his number, he always finds a way.” Not exactly the most comforting words for a CEO, CFO, or CRO to hear.
Now, the tables have turned. I became the guy that had to report to senior management. I was the person that had to put my neck on the line for a number that was based in part on someone’s gut feeling. The problem became that it wasn’t my gut feeling but rather someone else’s. I had a problem. I had to find a way to forecast accurately, and I had to do it fast.
I must say, it was not easy managing eternally optimistic sales reps. Operating in the grey area of hopefulness was a challenge that kept me up at night. With few exceptions, I found myself managing people just like me. A mixed blessing to say the least. I turned to some of the basics which helped me succeed in sales and added a dose of rigid execution. Systems, processes, and accountability.
About a year ago, I assumed the CRO position at QuotaFactory. Responsible for building a scalable and predictable revenue machine. Yes, I said predictable. Here is what I put in place that has enabled me to be nearly 100% accurate in my forecast for more than a year.
First off, you must have a defined and documented sales process IN WRITING! This should go without saying, but in my experience this is often not the case. Without this, you will not only be missing an accurate forecast, but you will have a very thin one as well. Figure out the best sales process for your product or service, document it, build it into your CRM and make sure it is followed. This won’t be easy, you will likely find yourself repeating yourself over, and over, and over. Welcome to sales management. Kind of like herding cats. Most sales reps are just not wired to be systematized, highly organized, or accountable. They tend to be driven and highly competitive, but the details, that rarely exists.
We start our forecast tracking when a discovery call or sales qualified lead (SQL) converts to a next step. My thinking here is if we are going to take the time to speak with the prospect again then it is safe to place them on our forecast with a 10% probability. When the next call converts to an additional conversation, which is likely a deeper dive with the same prospect or an expanded audience, we place the prospect at 30%; having scheduled a call with our operations team to discuss potential project scope. A successful next step resulting from this call would likely be a proposal, which we would place at 50%.
Most often the next step would be a proposal review, usually with an expanded audience including all decision makers on the prospect’s side (perfect world). Assuming all goes well in that call and we are able to receive a verbal commitment, we move the deal to 80%. Once the deal goes through legal/procurement we move the deal to 90%. When the signed contract arrives it’s 100% and celebration time!
Of course a process is just a process unless it is relentlessly reviewed and followed up on. This is where most sales managers fail. Given many sales managers are former sales reps, it just may not be in their nature to pay attention to detail and nag their reps. I know it does not come naturally for me. But winning does, and if you want to win then you need to be absolutely maniacal about the details, the numbers, and the process. There’s just no other way to succeed. There is always luck but in my experience the harder and smarter I work, the luckier I get.
Review JASON JORDAN
“Sales forecasting is a nuts-and-bolts activity.”
There are several things sales leadership can do to improve the accuracy of their forecasts, and the list of best practices is not all that surprising.
Sales forecasting is a nuts-and-bolts activity, but we complicate the task by allowing unstructured processes, random assumptions, and seller optimism into the mix.
First, train the managers and reps how to forecast. Not just how to run a pipeline report in CRM, but tactically how to forecast. Our research shows that most managers and reps are ill-prepared for the task, and those that have been trained to forecast do it much better.
Second, use actual historical data in the forecasts, not anecdotal assumptions. If I closed 34% of my pipeline last year and my average deal size was $27,348, then use those numbers to create next year’s forecast. Don’t let me fabricate my own assumptions when there’s trustworthy data in CRM.
Finally, hold managers and reps accountable for their forecasts. Don’t just ask for a forecast and then let it disappear into the executive suite. Revisit the forecast with me, and help me understand where it went wrong. I might actually learn something and become a better forecaster over time.
If you treat sales forecasting like an important business function with the appropriate level of rigor and management, then it will produce the results you desire. If you treat it as a distraction from the more important activity of selling, then you will get what you deserve.
Jason is a partner of Vantage Point Performance, a sales management training and development firm. He wrote Cracking The Sales Management Code, which experts claim to “fill a void in sales management in the new era”. Connect with Jason on Twitter and check out VantagePoint Performance here.
“The fundamentals never go out of style.”
First, let me be clear that I am not an expert on sales management. In fact I am not a good manager. I am a salesperson who started a training and publishing business 32 years ago, have had employees and salespeople, and confirmed to myself that I shouldn’t manage anyone but myself. I refer requests for sales management questions and requests for management training to my very capable sales management buddies.
With that said, I do know sales process, methodology, and messaging. I am a student, practitioner and teacher of what works and what doesn’t.
Sales forecasting involves lots of moving parts, but the one that sales managers and reps have the most control over is the sales process, and what they do during that process.
This might sound overly simplistic, but then again, the fundamentals never go out of style. In order to have more accurate success with forecasts, there needs to be a specific sales process in place, with concrete milestones between each step in the process.
When I sit and coach sales reps or listen to call recordings, I am looking for agreements and commitments that signify action, with time frames and names of any others who will be involved. This eliminates—or at least minimizes– best guesstimates.
But the process alone is not enough. That’s like a football coach saying that we are going to run an offense that will move the ball by dominating the line of scrimmage, executing power running plays 60% of the time, short passes 30%, and long passes 10% when we see the defense overplaying the line.
A player would rightfully surmise, “That’s great coach. But HOW are we going to do that, and what am I, as a player, supposed to do on every play?”
The sales process is the plan, the blueprint, the roadmap. And like in football, the players need to be trained, drilled, coached—during and after plays—and then everyone needs to “break down the film” afterward to analyze what worked and what didn’t in order to get better.
From a training and coaching perspective I often see sales organizations stumble and often fail miserably in those areas. Sure, they might have their CRM, other sales enablement technologies, and somewhat of a loose process in place, but the players are not trained adequately in execution, nor coached. They are lacking in the what to say and do in order to get prospect and customer action.
Is there any wonder, then, why the answer to the question, “What are your projected deals this quarter?” a stab in the dark?
Want more accurate forecasts, AND larger numbers in those forecasts? Don’t go chasing the next shiny technology object and Sales 2.0 or 3.0—whatever that means—and focus on what still matters today: People 1.0.
“Sales Managers need to create a culture that generates honesty.”
Firstly…Sales Managers need to create a culture that generates honesty. Telling their sales team that forecasts below target are unacceptable breeds unrealistic sales pipelines.
Secondly…if salespeople are consistently inaccurate with their pipelines that’s feedback for the sales manager that their sales person needs some development…it could be qualifying, closing, unrealistic optimism, they could be demotivated…in fact it could be anything. Something isn’t right and the Sales Manager needs to find out what it is and take appropriate action to resolve it.
Thirdly…how is the Sales Manager contributing to the situation? Ultimately they need to nurture, develop and lead their team. It’s easy to blame the sales person but what part has the Sales Manager played in creating the inaccuracy. If a Sales Manager takes responsibility for their part, learns from it and takes action to change the pattern then the pattern has to change. Remember…do what you’ve always done and you’ll get what you always got!
Leigh Ashton is the author of iSell. She is a speaker, trainer and coach and helps people incorporate psychology to make positive changes to their attitude, their approach and their sales results. Connect with Leigh on Twitter. Check out the Sales Consultancy website here and this free report for sales managers.
“ Do you know what type of salespeople you’re hiring?”
I had a great boss close to 25 years ago who frequently said: “Salespeople do what you pay them to do not what you want them to do.” True.
In Mike Weinberg’s recently published book, Sales Management. Simplified., he writes: “Sales. Is. About. Results. Period.” I like the book a lot. (I have an interview with Mike scheduled so look for a blog about the book soon.) One of his topics is that companies have gotten away from posting results and, in effect, stack ranking their sales team. He feels this is a mistake. So do I.
In my opinion there are three primary actions sales managers can take to improve the accuracy of their sales forecasts:
- Make sure the senior management team tells the salesforce what markets to sell into, what to sell and who to sell it to.
- Deploy hunters, beaters and farmers appropriately.
- Don’t wait for the telephone to ring.
Senior Management Direction
Per Mike Weinberg: “The job of the sales force is to execute the company’s strategy to perfection, not to create it on the fly.”
Some years ago we did work for a company that blew through $100,000,000 in funding because the sales force was trying to sell $1,000,000 plus enterprise solutions and the marketing department was creating demand for point solutions. For whatever reason the CEO of that company seemed powerless to focus his team on the right market, the right solutions and the right role to sell into. The failure of this company was not a lot more complicated than it sounds.
Management did not tell the sales force what markets to sell into, what to sell and who to sell it to. Simple as that. Forecasts were a joke. What a waste of time and money.
In my book, The Truth About Leads, I write about this as follows: “Hunters kill, beaters beat the bushes for opportunities and farmers farm the fields for up-sell and add-on opportunities. Hunters don’t like to farm or beat. Beaters can’t hunt. Farmers don’t beat or hunt–although many of them think they can hunt, and that is a real problem. Do you know what type of salespeople you’re hiring? Are you expecting hunters to beat? When you look at your sales force do you find 80% farmers and 20% hunters? If so, you are not alone.”
We worked with a company a few years ago that had a full-time sales executive focused on a single military base. When we met with him he told us (and his marketing counterparts) that the base was covered. The week we started market contact into that base we found a $1,000,000 opportunity that he knew nothing about. He was a farmer making the rounds each week talking to people he was comfortable talking to. He was not up to the “kill” that hunters have an acquired taste for. He was in his comfort zone. Real hunters have no comfort zone.
Don’t Wait for the Telephone to Ring
See the following, again from Mike Weinberg’s excellent book on sales management:
“[Experts] quote crazy statistics, telling everyone that today’s modern buyer is 70 percent through the buying process before engaging with a salesperson. [Sales executives] are waiting for business to come to them:
‘Don’t call them; they’ll call you when they’re ready’ is what experts declare. (Note from Dan: this is what I term “inbounditis.”)
“I take issue with the many loud voices preaching these deadly lies. These theories are not only wrong, they’re dangerous. They’re particularly dangerous because today’s under-mentored and under-coached Salespeople are gullible. The sole reason prospects get that far along in their buying journey without having engaged with a salesperson is that reactive salespeople are sitting on their butts waiting for the prospect to raise their hand and call them in!”
If your salesforce is waiting until the buyer is 70% of the way through the buying process then you’re responding to RFPs, becoming column fodder, and losing to a more agile, smarter competitor. This reaction-based process kills forecast accuracy.
One Fail Safe Recommendation
Some of the poorest performing sales reps are the best at selling to sales management. Every quarter you hear: “I know I missed my number last quarter but I have a killer quarter coming up.”
If you are employing an under-performer, here is a fail safe way to assess and fix the issue in one quarter. Assuming the individual has been with you for at least a quarter and is selling enterprise or a complex solution (not a relatively low priced commodity), ask the sales rep to select 25 accounts from which they would expect to close business in the next quarter. If they can’t find 25 good prospects to talk about you have your answer immediately. If they can find 25 good prospects let them know in advance that you will be thrilled if they find business outside the 25, but that the 25 are going to be what is evaluated at the end of the quarter to determine their status at the company. Failure to effectively assess prospects and focus time on high-potential accounts is a big reason why there is so much forecast inaccuracy.
“Accurate forecasts do not have to be viewed as an oxymoron.”
The two words “accurate forecast” are not an oxymoron, despite what far too many salespeople and sales managers believe. The single biggest thing management can do is to not use the forecast as the measurement of a salesperson’s expected performance. I admit that when I was a salesperson, I would frequently hedge my forecast to keep from being called in by my manager for a verbal beating. Not only did an optimistic forecast keep me out of trouble, it also allowed others to see me as a team player aggressively out there striving to make it happen.
The result of those hyped forecasts? They were usually unattainable, and I would miss my quarter end numbers. But to me, it was less painful to miss the quarter end than to deal with weekly inquiries from management.
The lesson from all of this is management needs to see the forecast as just one of the tools to measure performance. It’s not the only tool. Management must also do a better job educating the salesforce as to how the submitted forecasts impact other functions in the company from finance to supply-chain.
Accurate forecasts do not have to be viewed as an oxymoron. They won’t be when sales and management both use the forecasting process as it should be used.
Mark a.k.a. The Sales Hunter is the author of High-Profit Selling: Win the Sale Without Compromising on Price. He is best known for his thorough understanding of pricing strategies. Connect with him on Twitter and check out the Sales Hunter blog page here.
“The majority of reps struggle to understand which opportunities have a chance of closing and which ones don’t.”
Going into the quarter and committing a number that sales managers will be able to deliver upon is one of the hardest things to do.
Because the majority of reps struggle to understand which opportunities have a chance of closing and which ones don’t. (So they end up forecasting everything or nothing).
So without the following two things, it’s almost impossible to obtain an accurate forecast:
- A common language. When you define a structured, repeatable method for qualifying deals (based on proven best practices), your team has a common language you can use to quickly dig down into the fundamentals of an opportunity. Then in reviews, you can rapidly sort out the right opportunities and get your reps to focus exclusively on these, instead of wasting time trying to figure out where an opportunity even stands.
- Visibility for management. It’s critical to be able to identify which opportunities are evolving and which ones are at risk. If you’re tracking your opportunities over a combination of spreadsheets, documents, and/or a CRM, it’s likely you won’t have the accuracy or transparency you need.
That’s why you need to have ONE reporting tool that your entire team uses to track and manage your entire sales process and gives you the visibility you need.
Rizan is the founder and CEO of iSEEit, the first CRM designed specifically for the B2B complex sale. Rizan founded iSEEit to make a difference for salespeople everywhere on a daily basis. Follow Rizan on Twitter and visit his blog here.
“Insert as much objectivity into the sales process as possible and remove the subjectivity.”
The best way I know of for sales managers to improve the accuracy of their sales forecast is to insert as much objectivity into the sales process as possible and remove the subjectivity.
I call forecast reviews “story time” because that’s exactly what they are. In preparation for forecast reviews reps spend time coming up with stories about why a deal is or isn’t going to close and then the manager has to sift through the story to find the real reasons.
I always knew a deal wasn’t going to close when a rep would start off the conversation with “let me give you a little background on this one.” There is also way too much “gut feel” when it comes to forecasting and since every reps gut is different it make it almost impossible as a manager to be accurate with the overall forecast.
The best thing to do to help everyone get on the same page and improve the accuracy of the forecast and value of the conversations is to identify the objective components of the sales process to use as a baseline for the discussion.
Negotiations is all about “gives” and “gets” and the equality of them throughout the process. The more equal the deal is the better likelihood it is to close.
A simple process to go through is to outline all the things that clients ask for during the sales process (gives) and prioritize them 1-20 (or however many there are) with 1 being the easiest thing for you to give away and 20 being the hardest. Then outline all the things that we want throughout the sales process (gets) and prioritize them 1-20 with 1 being early and 20 being late. The gives and gets need to be actual things that can be proven, not things like “trust” or whatever. Then match them up to create a scorecard where you can objectively score deals. Once the objective pieces of the deal are confirmed then you can talk about the subjective stuff that may or may not make a difference.
This approach gets everyone on the same page, creates a common language and has a significant impact on improving forecast accuracy.
For John, “sales is the hardest but most rewarding profession in the world when done right”. He is the owner of J. Barrows and has worked with Salesforce.com for over 5 years. You can connect with him on Twitter and read his insightful blog here.
“Great sales management is consistent and monotonous.”
Having a consistent sales process aligned to the buyer’s journey is a must for accurate sales forecasting. Ask yourself questions like, “Are my sales stages aligned to the process a buyer goes through on the way to making a decision? Do each of my reps understand what is required for an opportunity to be labeled with that stage?”
You need to leverage technology in order to remove human error from sales forecasts. Every human being interprets sales conversations differently. No matter how much training and coaching, you can’t remove human biases from the equation. Solutions such as TopOPPS, Aviso, C9 (part of InsideSales), and Pilytix leverage technology to identify and minimize human error.
Great sales management is consistent and monotonous. It’s repetitive and rhythmic. I’m a horrible sales manager for this reason. My admiration for great sales managers is off the charts.
Steve Richard is co-founder and CRO of Vorsight, VorsightBP and ExecVision, and is known as a champion of best practices, live calling, and inspirational speeches. He is what colleagues say is “most likely to stop you in the hallway and sign you up for writing a blog post”. Follow him on Twitter.
“The manager that refuses to continue to push their people to exceed forecasts and quotas will forever find themselves coming up short on forecast.”
Sales managers can improve their forecast accuracy by not trying to simply meet them, but by aiming to exceed them by 10X. Most people dramatically underestimate the amount of work required to hit a target, any target, whether it be in their personal or professional life.
By aiming to exceed quota by a large margin the levels of activity must change coming up short on a 10X forecast will more often than not land you at your target.
Another thing I did was I would put an expiration date on a lead that was working, if the salesperson could not close the deal prior to the expiration date, it was reassigned to another sales person. While this might not be popular in the beginning, it most certainly increases the urgency that salespeople worked with trying to get a deal done.
The manager that refuses to continue push their people to exceed forecasts and quotas will forever find themselves coming up short on forecast. It has always been my opinion that if a salesperson is going to quit, have them quit because you pushed them too hard rather than because you did not push them enough.
For international motivational speaker, real estate investor and New York Times best-selling author Grant Cardone, “success is your duty, obligation, responsibility”. Grant wrote If You’re Not First, You’re Last and Axiom Award Winner Sell or Be Sold. Connect with him on Twitter and visit his blog here.
“You can’t build a strong forecast on shaky foundations.”
Improving the accuracy of sales forecasts doesn’t start with the sales forecasting. Unfortunately, that’s where managers tend to focus in diagnosing and improving forecast accuracy and quality. But you can’t build a strong forecast on shaky foundations.
- Let’s work backwards in the process. A high integrity forecast is based on a high integrity pipeline. If your pipeline is garbage, your forecast will be worse. A high integrity pipeline consists of high quality deals, located in the right stage of the pipeline, with an accurate forecast close date. But, how do we determine that we have a high integrity pipeline? It’s based on a buyer aligned sales process that sales people actually use, and managers are coaching to. If people are using the sales process, then you know they are executing a strong sales strategy. Leveraging the sales process, you know they have a well qualified–real opportunity. You know the sales process is aligned with the customer buying process. You know this well aligned sales/buying process includes validation and verification checkpoints. Let’s dive into the validation and verification points. We all know our sales process has to be aligned with the buying process. As we help lead the customer through their buying process, there are critical milestones or checkpoints we validate with the customer. We can’t move forward unless the customer has achieved their goals and milestones in their process. So aligning the selling and buying process makes sure we are synchronized with the customer and the decision they are making. As a result, we never get to “wishful thinking,” we know where the customer stands, the actions they need to take on their side–and that they are taking those actions. As a consequence the process becomes self validating. Follow this chain back to the starting point of the discussion and we have far more accurate sales forecasts. Our sales process and the customer buying process drives everything that happens. It drives the accuracy of our pipelines, since the pipeline is just the collection of every opportunity and where each is in the sales process. The forecast is, in turn based on those opportunities that sales wants to commit to the forecast, for a specific close date and value.
- This demands further examination. What is an accurate forecast? An accurate forecast is a deal that comes in at the date and value committed–in fairness, it’s a reasonable window for each, for example, plus or minus 2 weeks of the forecast close date, plus or minus a certain amount of the projected deal value. A deal that comes in significantly early, significantly late, or at a much higher or lower value than forecast creates problems in the organization. Most sales people would think, “What’s wrong with closing the deal a month early?” or “What’s wrong with coming in 30% over forecast?” The problem is the sales forecast drives everything else in the organization. It drives material/part purchases, line scheduling, resource scheduling and many other things. The rest of the company builds their work plans based on the forecast. So an inaccurate forecast has real cost and business impacts through the organization.
- Analytics has the potential to help us in the forecasting process. With certain product lines, for example production parts, where the cadence of purchasing is reasonably predictable, historic trends, adjusted for current factors can be very accurate. Generally, the more frequent the purchasing activity, the more an organization might be able to leverage analytics to help in the forecasting process. Another area is high volumes of purchase transactions across a large number of customers. I have a client that processes 1000’s of orders each month, across 1000’s of customers. Here’s where analytics against the aggregated purchase trends might supplement the forecast. We are seeing some emerging use of analytics–though there are lots of caveats. We can analyze the sales person’s success in selling a product line to a certain type of customer competing against a certain competitor. This is emerging as an approach to forecasting, but again it depends on having enough, accurate data on which to run the analytics.
Finally, we can track and analyze customer buying behaviors–actions they take across multiple channels to develop predictive model of buying behavior. Again, these are methods that are emerging that have tremendous potential in some markets, with certain categories of products–all dependent on great understanding of buying behaviors and good data.
Dave established Partners In EXCELLENCE as means by which he could have a profound impact in improving the effectiveness of business professionals. You can follow Dave on Twitter and check out his blog here.
“Trust your reps to give you factual insights from the field and accurate sales pipelines.”
Whose sales forecast are we talking about anyway? Stop having sales managers do them.
A sales forecast is built on an individual reps pipeline. The top reps have the most accurate forecasts and pipelines. Instead of sales managers pulling together spreadsheets and reports and then meeting with reps to check off the boxes of “Which ones are going to close this month or quarter”, sales managers should be coaching their reps to understand how their buyer buys and how to build their pipelines on the benchmarks of their buyer’s behavior.
Managers and executives are too far removed from the actual buyer behavior that the sales forecast is based on. Hire A players and those who are coachable so you can trust your reps to give you factual insights from the field and accurate sales pipelines.
Less time doing reports means more time to coach “B” reps to “A” players. The pressure to have a healthy pipeline and forecast can lead to qualification happy ears. When managers are leading by “checking the box” on opportunities and deals, they miss the opportunity to coach a rep on how to differentiate themselves from the competition by looking for the no. Looking for the no is a disqualification coaching process that will enable reps to have insightful and challenging questions of why a buyer might not be successful with a solution, what they need to look out for and allow them to offer solutions to the challenges that prevent them from reaching their goals.
Founder and advisor of Unbound Growth, Carole believes that to fix sales, we need to fix the salespeople’s mindset. She co-founded Unbound Growth after running a marketing agency and finding that her client’s old sales techniques did not work on today’s buyers. Connect with Carole on Twitter.
“Increase your transactional sales load and unbundle your strategic deals.”
Forecasts certainly suffer when reps work the wrong deals or count on insufficiently qualified prospects.
They suffer when the production of opportunities is not matched to the numbers they’ve promised to make. But there are other reasons.
I suspect sales leaders could make their forecasts more predictable by making their deal portfolios more transactional in nature.
How do you do that? By shifting much of your sales activity to high-volume, high velocity work that can be sold virtually – often “as a service” or through a recurring revenue model. While critical to the success of many firms, large, strategic deals tend to make your pipeline much more lumpy than transactional ones.
It’s tougher to forecast accurately when your business disproportionately revolves around major accounts pursued by a field sales force. Such teams spend an inordinate amount of time “off the grid,” beyond the purview of managers/coaches. Quota-carrying, inside sales reps, by contrast, tend to be more actively managed and coached. Their teams generally run more experiments, get more market feedback, and learn at a faster rate than their counterparts in the field.
Given these dynamics, there’s plenty of evidence that money is on the move and structural shifts are underway. Enterprises that relied excessively on big deals to make their numbers are now trying to balance their customer portfolios by going down market. Meanwhile, high-growth, venture-backed firms that have mastered the transactional sale are trying to go up market (expanding now that they’ve landed).
But let’s take this a step further: What if you were to “unbundle” your strategic deals so that your account managers could sell them more incrementally? That, too, might make them more easy to forecast – and, of course, easier to close in a risk-averse era.
If you’re struggling with forecasts, perhaps it’s time to increase your transactional sales load and unbundle your strategic deals. Perhaps it’s also time to place more emphasis on the virtual sale.
Visible Impact founder and partner Britton Manasco produces the thought leadership strategy blog Illuminating the Future. He is co-author with Anneke Seley of the forthcoming book Up Close and Virtual: Success Strategies for the Next Era of Selling. You can follow Britton on Twitter and visit his blog here.
“Set appropriate expectations.”
Revisit the training of their sales professionals and set appropriate expectations.
Patricia wrote Make It So You Don’t Have To Fake It. Meetings and Conventions magazine named her “one of the 10 most electrifying speakers in North America.” Connect with her on Twitter, and check out her website here.
So there you have it. The views and perspectives of some of the world’s finest sales minds. The upshot is there is no one way to make your sales forecasts more accurate as there are so many variables to take into account. Sales forecasts should be viewed as part of a wider sales performance management objective.
Does your company use Salesforce CRM? If so, you might want to check out our new native app, Sales Performance Manager, which gives sales managers the tools to manage, coach and forecast with confidence. Click on the image below to see a demo of Sales Performance Manager in action.