Sales forecasts are known to go wrong and understandably so, given that many of them are based on little more than hope. An Aberdeen survey points to an average sales forecast accuracy of just 81%. Now that will not make your CFO happy, will it? Being in sales operations, a large chunk of my time is spent forecasting and here are some things that I have seen work.
Good Data: Forecasting is only as good as the data you have at hand. Keeping CRM systems up to date is a perennial problem across organizations with reps disliking its very nature, manual and laborious. Even when reps update their opportunities, they are often sandbagging, under-representing deals to fend off pressure from the sales manager. Encourage rep discipline when it comes to CRM data. One way to enrich your CRM systems would be to incentivize it with gamification and fun contests. Gamification appeals to the competitive nature among reps and is bound to deliver results; it can also be used to keep your sales force motivated.
A Tool to Track Sales Activity: Sometimes, a rep may say that a particular deal will close by month end, but it may not be accompanied by any commensurate sales activity, such as a demo and customer presentations. Such instances can catch your forecasting off guard; you need to question such deals. Consider a tool that can track sales activity by monitoring emails, phone calls, meetings, and demos. With intelligence on granular sales activity, you can have a pulse of the opportunities that are truly near closing.
Realistic Goals: Unrealistic goals and targets don’t work. Take a look at historical win rates and close rates while setting organizational targets. Consider macro and micro risk factors and how your competitors are faring. Another important factor to look at while setting targets is the conversion rate from one buyer stage to the other. Say you have three buyer stages: pipeline, upside, and committed. Monitor the average conversion rate from one stage to the other. This can help you factor in the drop off rate while target planning.
At the rep level, the target should be 2X or even 3X their quota. Say a rep has an annual quota of $120,000, each month they will have to close business worth $10,000. In order to do so they must have a pipeline of $20,000-$30,000.
Blue sheet Process: How do you convert more deals into wins? Identify choke points in particular deals with the Miller Heiman blue sheet process which encourages reps to map out the entire deal: the decision makers, the decision making process, blockers, the pricing strategy, your strengths and so on.
Use the blue sheet to seek collaborative advice. Say a rep is stuck in a deal and wants some suggestions. They can use the blue sheet as a backdrop to jump on a call with sales managers, sales leaders, and other executives. This shouldn’t be a harassment exercise but rather a way for more experienced folks to offer their suggestions, leverage their contacts, and join customer meetings and/or calls. This process of putting specific deals under the magnifying glass can help close more deals and improve the predictability factor.