Sales Forecast Accuracy – just “around the corner”
Going around a corner should be easy right? Driving your car, driving to a prospect call … we do it every day. Sharp corners, wide corners – this is easy, right?
Improving your “Forecasting Process” is a sharp corner – and many sales managers get propelled off the road into the ditch. By habit, and process rigidity, they continue to prepare Sales Forecasts that are dubious. In fact, one large organization I worked with “only believed 30%” of the $ dollar amount forecasted by the sales team.
The first problem indicator is a “% probability” column somewhere in the forecasting spreadsheet. Pressing a salesperson for “confidence level” or “% probability” is the wrong thing to focus on, and leads to an avoidance of the decision-makers’ internal readiness. Probability tends to increase every time we take an action. This leads to an inflated sense of deal progress, and a tendency to pester the customer for closing, which soon annoys them.
CRM: Not the Answer
Also – using a CRM system does not solve the sales forecasting problem, and in fact many B2B companies build Excel-based sales forecast models outside of their CRM system, to handle data inputs and calculations about forecasting probabilities. These spreadsheets often become monsters, the “mother-of-all-spreadsheets”, and often suffer from a garbage in-garbage out syndrome.
So, this may not sound easy – but I’ll describe a method that works – and encourage you to try it. The critical thinking is this – we need to look at the soft data that reflects customer views of buying approval progress, also known as “Deal Progress”.
So what does “soft data” mean, and how does it lead to a better forecasting solution?
First – sales forecasting is about modeling the thoughts and wishes of customers. It is very intangible stuff – hence I call it “soft data”. It is based on a set of values and decision-making rules that exist in the mind of the prospect.
In other words, for each customer opportunity, there is a prospect level of interest or non-interest that we detect in the first conversation. Our “selling” job is to increase this level of interest to a point of gaining the “buy decision” – usually when the economic case is very strong, and the time drivers are clear and highly relevant to the prospect – the best sales people stake out a path to that goal from the first call.
The path is best seen by visualizing the closing meeting – the day when your champion presents his/her action proposal to the decision-maker for funding approval. Will it win? Will it lose? Will it go into limbo known as a “stalled deal”?
Ironically, I have found the best way to win is to be sure to not lose – and in the minds of decision-makers there are 4 reasons to refuse approval of a deal:
– Pain – no important problem(s) being solved,
– Payback – no clear payback, no economic model
– Product – not a great product fit,
– Plan – no solid plan of action, no time hooks that create urgency.
The nifty thing about this is that a sales person or sales manager can readily self-assess how strong your case is along these 4 dimensions. I suggest allocating 60% of the deal’s opportunity size to these 4 dimensions – and then 20% when you get a “verbal decision” and move into final paperwork closing. So the fraction to include in a pipeline forecast is a “deal progress” fraction based on buyer behavior we can influence, not based on a sales estimate of “% probability”. We believe in this so much that we built it into SmartFunnel, our sales funnel management system.
In addition, this deal progress approach gives insights into what can be done to improve closing chances – the 4 dimensions of a deal are amenable to change. A pain statement can be improved, made more relevant to a specific buyer’s company, made more impressive by using the language of that specific prospect’s company, rather than generic benefit sheets. The Payback, Product, and Plan stages also lend themselves to prospect conversations that create stronger proposals (…and written tools to make your champion a strong internal presenter). I’ll have more on these selling ideas in future blogs.
In summary, the forecasting method I am recommending leads to more accurate numbers, for both the revenue pipeline and production outlook. This gets you out of the ditch, back on the road, with a cool new direction towards forecast accuracy. In addition, it generates some great insights on how to strengthen your closing proposal, leading to better sales results and earlier closing as your sales bonus.