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Successful Forecast Accuracy: A Shot in the Dark?

“A shot in the dark”: a wild guess and a hopeful attempt to do something with fingers crossed for success.

It is no secret that a successful business plan is driven by solid sales and revenue projections, which means your sales forecast is not the place to take a shot in dark.

Nothing happens in business until you sell something!  Sales is the engine that generates revenue and revenue is the key factor to almost every business decision made for an organization’s financial health.   How much product to produce and keep in inventory? How many people to hire and their compensation? And how much cash is there to invest?

So if predicting sales results is so critical, you’d think the key to accurate forecasting would have been perfected years ago.  Yet, forecast accuracy continues to be a challenge and often creates tremendous stress for sales reps and managers alike. While the understanding is that a forecast will almost never be 100 percent accurate, no sales executive wants to be associated with failing to meet their goal, or lose credibility by underestimating their target number.

Early on in my sales career, forecasting was purely a subjective process.  Before salesforce automation became the norm, pipelines and opportunities were tracked manually.  My pipeline was managed in a notebook that never left my side.  I then loaded the data into a Word document or Excel spreadsheet, and I alone determined where any deal was in the sales process and, therefore, when it would close.

From there, the sales forecasting process was simple.  I provided my manager my forecast.  He cut it in half and sent that number to his boss.  His boss cut the number further and submitted it to his boss.  The forecast to leadership had absolutely zero correlation to the forecast being chased by the field – and, still, we often missed!

The days of a purely subjective forecast are over for most of us.  The antiquated, manual process has been replaced by predictive analytics, automated forecasts output from software systems, and “objective” data based on milestones that are predictable.

With all this sophistication, you’d expect the ability to accurately forecast sales would be greatly improved.  In some cases, it has.  Yet, in many cases, it has not.  The question often asked is “Why is it such a challenge?”  And if I understand the “why,” the question becomes, “What can I do to fix it?”

The reason why forecast accuracy remains elusive boils down to a few common denominators.

  1. Sales Process. When sales teams don’t have a well-defined sales process or a compliance to the process they have, the data they are relying upon in their forecast becomes questionable.

To submit an accurate forecast, you must be able to determine where the prospect is in their buying process and then map that to your sales process.

  1. Prospect qualification model. Qualifying prospects is a key activity for sales representatives.  A multi-faceted qualification model is a key to success.  Forecast accuracy will be improved if one of those facets is a deliberate understanding of the prospect’s timeline to buy.  Sales reps who consistently understand the buyer’s process and timeline outperform those who don’t in terms of forecast accuracy.
  2. I recently worked with a sales leader who didn’t accept the forecast submitted by a rep.  To be fair, the forecast was low and the pipeline was weak.  In spite of this, the sales rep was asked to go back and find a way to increase the number.  The result?  A satisfied sales manager but a forecast based on a shot in the dark with no credible chance of being achieved.  When pressured into fabricating an ideal forecast rather than an accurate one, the sales rep has no accountability and limited forecast accuracy in the sales numbers.

The fix: Backwards thinking for forward progress

At ValueSelling, we work with clients every day to address the challenges of sales forecasting.  Specifically, defining a sales process to which everyone complies, deploying a consistent qualification model to better understand the prospect’s ‘when’, and using value and outcomes as the motivation to take action.

We begin with the end in mind.  In other words, a prospect deciding to do business with you is a logical outcome of a well-executed sales process.  It is not an event that stands alone.

Backwards thinking is a technique to understand the ideal timing of the outcome, value or result, and use that date to back into a logical date to execute a decision.  Sounds simple, yet this process has to be done at the right time and with the right people to be effective.

When backwards thinking results in a timeline that the prospect can agree and commit to, sales executives now have verifiable evidence that the ‘when’ isn’t merely the sales rep’s guess at closing the deal, it is reflective of the prospect’s agreement of when they will make the purchase.

In the end, a well-defined sales process that includes a solid qualification model and collaborative planning and agreement with the prospect, will yield an on-target sales forecast rather than a missed shot in the dark.

 

Sell with Value!