Sales forecasting is hard…as hard as any other attempt at predicting the future. Ponder this: CSO Insights has uncovered that only 47% of opportunities forecast as wins (often relatively late in the sales process) go on to close successfully. The average company would improve accuracy by flipping a coin.
The problem isn’t how you do addition: every computer, every CRM, every spreadsheet will arrive at the same total on a set of opportunity values. The problem is doing your math on quality estimates on opportunities. I know: “thanks, captain obvious”.
Predictive Insight on Opportunities Drives Better Forecasts
Accurate forecasts aggregate high-quality, predictable deal estimates. Developing reliable estimates of “winability” is a culmination of doing a lot of things right. To achieve reliable, predictive insight on opportunities in your funnel takes:
- A consistently followed sales process
- A rigorous, disciplined sales methodology to keep sales process aligned with the customer buying process
- Consistent, effective sales leader coaching to the methodology.
- More coaching– by sales leaders to identify key behaviors of your top performers, then describe and replicate them across all sellers.
- Opportunity analytics and scoring, to put objective, proven criteria into your estimates of deal quality
Let’s face it, sales isn’t the predictable if/then, rigid cause/effect world of say, manufacturing. Customers are not under our control, and our efforts have a random feel to them. Watch a video from CSO Insights to see more.
Like counting cards in blackjack, use of analytics and opportunity scoring moves the balance of an unpredictable system in our favor. You can only get the totals in your forecast to be highly predictable if you can be more predictive on every deal in your funnel…Reducing estimate variance on deals is how you drive variance out of the aggregate measure.
Major Contributors to Forecast Error
It’s hard to make a consistently reliable estimate of opportunity quality when some sellers:
- Keep stuck or inactive deals in their funnel. These opportunities often absorb time and resources into lost causes. Coaches should help sellers either reignite or remove these opportunities from the sales funnel/pipeline, because they pollute funnels.
- Have slow-moving deals. Like inactive deals, opportunities progressing at a slower than normal rate are reduced probability deals. These are often those dreaded “win slow” opportunities…the ones that consistently (and even repeatedly) miss projected close dates.
- Chase opportunities which aren’t really a fit for the customer, or with customers who aren’t really a fit for our company.
- Enter only “no doubt” deals. This behavior is driven almost completely by management environment and sales culture. If you as a sales leader are seeing this behavior, the good news is that fixing it is entirely within your control. The bad news is that fixing it is entirely within your control. Coaches need to take this behavior head on, but with a light touch: understand the perceived benefits driving the behavior and clarify downsides of sandbagging.
- Enter “manager repellent” deals into CRM. Sometimes we sales leaders create the cause of our own demise. If we insist on a certain number of news opportunities in the funnel without inspecting their validity, some sellers with stuff the funnel with enough “opportunities” to keep us off their backs. Stop this behavior by coaching for deal quality..with objective criteria.
- Fail to account for customer buying process. Incorporating milestones from a customer buying process into our methodology and sales stage definitions goes a long way toward reducing this source of forecast error.
Each time one of these flaws creep into your funnel, your forecast accuracy declines. Part of increasing forecast accuracy is reducing these unforced errors.
An Integrative Sales Management Cadence
I enjoy working with sales leaders to put rigor and consistency into a regular management cadence. We work on all of the elements described here, sometimes as part of a long-term path to sales culture transformation.
I’ve written a paper that describes some of the high points of an integrated management cadence system, and how the different components reinforce one another. The paper also connects these major components to world class sales outcomes using CSO Insights research. I invite you to download that whitepaper if you would like to learn more.
Feel free to comment below, or to contact me directly to discuss in more depth.
To your success!