A recipe to improve sales forecast accuracy

Forecasting accuracy is the lifeblood of a growing business. Reliable visibility of orders that will hit the books, cash that will hit the bank, and the costs of building and servicing the order book drive the timing and prioritisation of key decisions that make it possible to profitably keep customers, add new customers, and both attract and retain the best people.

A growing business will be time poor, and deal focused, and the sales effort may still be led by the founder, or maybe you have hired what you consider to be salesnaturals. Neither of these character types are likely to focus on the integrity of their forecast and a deliberate approach is needed to create the conditions to build trust in the numbers.

Common barriers to forecast accuracy

Forecasting is probabilistic, not absolute, but seller behaviours are often driven by the pain of a bad forecast rather than the benefits of a good one which leads to ‘smoke and mirrors’ as a means of deflecting inspection or expectations. The reality is that the forecast should be a business like judgement supported by an action plan to secure the best possible outcome.

It’s not uncommon to find businesses who rely on CRM stage based probabilities to prepare a forecast. This may be good enough if you are selling a high volume of widgets or knowingly pulling down CRM report to gain a simplistic view of the pipeline but, for most businesses, the CRM stages are only one view of winnable deals which instruct the focus of pipeline and forecast management.

Relying on lagging metrics will hinder long(er) range forecasting. Leading metrics may be harder and less exciting (no-one goes to the Board to talk about the conversion ofMQLs to SQLs) but today’s leading KPIs are what delivers tomorrows results.

The management task is made harder by inconsistent expectations and poorCRM discipline. Growing teams will bring together different approaches to add to existing norms and a clear method and terminology will simplify the process and make it easier and faster to spot and act on actions, information gaps, or dependencies that drive forecast accuracy.

Coaching by numbers

As you build out a forecasting method the sales manager will take on the role of ‘teacher’, delivering instructions and enrolling the team to a common approach.Once established, the investment will be coaching for individuals driven either performance data or specific deal scenarios.

The sales manager should know historic numbers by individual (performance attainment, sales cycle length, win rate, conversion through the funnel) and identify opportunities to develop. A KPI tracker will help here by removing emotion from the discussion.

Forecast numbers themselves may reveal forecasting bias and tracking slipped deals (CRM stage history, forecasts, outcomes) will help to make forecast inspection a joint endeavour rather than a manager intervention.

The sales manager must decide which factors are the best indicators of forecast accuracy and how to use them. Here is an example of a sales managers forecast framework...

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Terms of engagement

The importance of accurate forecasting needs to be made clear with leaders setting the example by being seen to use the data. Make it clear this is a priority topic, being mindful of the risk that everything in a growing business is called a priority!

It’s helpful for sellers to understand the business agenda that is affected by the quality of the forecast. Each company will have its’ own context but examples from recent projects include...

Sales manager:

• What message do we give to  investors this month / quarter?
• What should next year’s targets  be?
• How many sales / account / service people do we need?
• What skills do we need to invest  in?
• Are we working in the right  sectors?

Seller:

• What do I need to do / change to  hit a target?
• How should the business prepare  for my incoming projects?
•  Do I know my customers well  enough?
• Am I generating enough leads?
• How much money will I make?!

As a leader you could raise the volume to get sellers on board. That will have an effect but not necessarily the one you are looking for. Other opportunities to clarify the importance of forecast accuracy include...

• Train the forecasting process in sales onboarding.
• Embed the qualification framework language into CRM stages as well as forecast and deal reviews. Demonstrate that qualification rigor matters.
• Use a deal scoring card to facilitate forecast integrity discussions.
• Make forecast data visible.

Personalise the coachable moments

Although technology plays an increasing role in tracking data and activity to inform sales forecasts there are common references to archetypal behaviour observed when it comes to sales forecasting. Understanding this helps sales managers to be agile when building a team forecast and discover where coaching can help individual contributors.

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3questions to get the rep talking

Time is short and a standard set of forecast management questions can quickly get monotonous for all involved. That said, ‘why do anything’, ‘why do it now’, and‘ why do it with us’, are always relevant and as an opportunity progressive through the pipeline towards the forecast it is reasonable to expect clarity around the ‘three why’s’ to increase.

Sellers are adept at batting away inspection. Find questions and ways of asking them that are comfortable to you. The objective is to provoke discussion and invite business thinking and verifiable evidence that the forecast is realistic and each forecasted deal has a close plan. Each company will have its own language but example questions might include...

• If we called the customer right now what will they say is the next step / probability of getting this over the line?
• If your commission was dependent the accuracy of the close date would you change anything?
• When is the next meeting/call and what do you expect to happen?

The sellers should believe they are trusted to deliver their forecast but it doesn’t hurt to socialise the idea that you might get closer to the deal.

Margin notes

Sellers often feel the forecast is admin for the managers benefit and doesn’t help them close deals. Show them this is not the case by acting on forecast reviews to mobilise resources and remove blockers from forecasted deals.

Remember to celebrate forecast accuracy; not just wins. No fanfare, but a nod of recognition over and above any roller coaster achievers or bluebirds.

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