Removing guesswork from the sales forecast

Removing guesswork from the sales forecast

Sales forecasting gets more subjective as a business grows.Here are 6 questions a CEO should ask to test the integrity of the numbers.

As the business scales up the list of considerations grows; more reps, higher costs, new territories, new products and increasing expectations of repeatability and predictability.

The impact of the sales forecast grows too. It is a critical input to decisions about staffing levels, funding requirements, product development and output capacity. It also has a direct impact on staff morale, senior management credibility and the management of expectations among investors, partners and customers themselves.

The details of individual campaigns will be addressed in regular deal updates. Focus on these 6 questions to understand the gating factors to forecast accuracy. The answers will help prioritise the development of skills, tools and behaviours to improve forecast quality and decision making throughout sales campaigns.

Do we understand ‘Why’?

This is an old mantra but continues to be a great litmus test of forecasted opportunities. Why will the prospect do anything, why now and why with us? From a forecasting point of view the level of credible understanding should match with the forecast record of individual sales people or the team as a whole. There is no foul in not having clear answers so long as the pipeline record reflects that status in terms of value, next steps and close dates. A CEO shouldn’t be inspecting individual deals, unless they are transformational, but should be confident these fundamental questions are being asked and answered.

How well does the opportunity fit the Ideal prospect profile?

The ideal prospect profile should be a natural filter for the majority of opportunities that make it onto the forecast. The profile describes key elements of the most attractive customer’s business and the value they place on our ability to solve problems. History should be a strong indicator of the actions, behaviours and tools needed to close an opportunity with the ideal prospect and that should be reflected on the forecast.

These opportunities should be easy to inspect and we can be confident that the content, tools and messaging being used, and the skills of the salespeople, are all informed by success with the ideal prospect.

How well do we know the buying process?

Understanding the buyer process is critical to judging the accuracy of the forecast. Evidently, if the salesperson doesn’t know why the customer takes specific steps, when they take them, who owns them or how they are executed, it’s not realistic to accept a forecasted close date without more scrutiny.

This is not a topic to apply guesswork. It requires active listening and questioning skills to get beyond a superficial level of understanding, particularly if new information emerges or events don’t play out as expected and it becomes necessary to retrace process steps. This is a particularly relevant topic where deals become stuck.

The salesperson should know the formal steps, the key people and their roles and the informal or environmental factors that could influence progress.

How effective is the connection strategy?

While knowledge of the buyer process steps is critical, the influential relationships should be formed well before these steps are initiated.

If the prospect maps precisely to the ideal prospect profile, or the opportunity is an upsell with an existing customer, we can believe the connections are strong and the salesperson is confident deploying the tools and content available to justify the forecast status.

Where the opportunity is new business, the connection strategy requires challenging for fresh thinking supported by content addressing the relevant vertical or prospect profile to support compelling storytelling. The salespersons ability to find and engage genuine decision makers and make a strong enough connection will also add weight to the credibility of the forecast.

This is hard work. The status of the connection strategy should not qualify an opportunity out but should inform the reality of the forecast.

How trustworthy is the CRM data?

Regardless of system maturity (dedicated forecasting app, vanilla CRM or a spreadsheet) pipeline reporting will be the foundation for the forecast.

For most businesses, system generated reporting will not tell the whole story. To give an indication of forecast accuracy, and avoid the time consuming contamination of the salesperson’s own narrative, there must be clear ‘exit terms’ to move an opportunity from one process stage to the next and clear ‘next actions’, including owners and dates, to indicate there is a progression plan. The detail can be debated but a forecast health alert can be triggered if these details are absent.

The reporting should also raise yellow alarms where guesswork is indicated by end of quarter close dates, excessive ‘hang time’ within stages or close dates that are out of step with typical sales cycle lengths.

Does the sales rep ‘own’ the forecast?

Salespeople should regard themselves as personally accountable for their forecast and not as data entry clerks. Make sure each rep understands what the pipeline and forecast reporting is used for and mandate a common format that is easy to use.

There should be no exceptions. Salespeople will often believe their circumstances are unique. They will tell you the admin is cutting in to selling time regardless of how much admin is required or how productive they are the rest of their time!

Challenge the use of default values in the reporting tools.Fixing probability percentages to stages takes away the obligation from the salesperson to make a judgement. Make sure entry screens are clean and easy to use and key forecast information is prominent.

Margin notes

Some of the colour behind these 6 questions might be surfaced by system reporting, emerge in deal or pipeline reviews, or by the manager’s experience and instinct. Each manager will know their individual salespeople and where to shine a light. These questions quickly identify critical gaps, repeated mistakes or sub optimal behaviours that need to be addressed to improve forecast accuracy.

The lessons learned should become inputs to content creation, training and coaching investments that raise standards across the whole sales team including onboarding processes and initiatives to nurture, retain and develop the best sales performers.