If you achieve anything like 100% accuracy with your sales forecasts I suspect you sleep well at night. But for most sales leaders, this is utopia not reality! In many organisations sales forecasts are neither reliable nor useful.
I was talking to a business associate of mine who managed a large sales team and asked him how he managed his sales forecasting. "Well" he said, "we just have to predict the budget number which more often than not we bring in by discounting at the end of the month and there you go." I was intrigued and asked him why he couldn't give a forecast which represented a truer picture of his sales forecasts.
"If I did that, I'd be fired" came the reply!
The pattern that emerged meant that his sales team were losing margin on potential prospects for the next month (or quarter) in order to entice them to buy now. There was also a fear factor of telling it like it was. “How much do you lose in lost margin over a year to deals brought forward in this way” I asked? Looking pained he said "millions" so I left it there for fear of picking too much at a clearly painful scar.
I kicked around ideas with him about whether he’d ever tried to improve his forecasting methods. But I saw the nervousness in his answers meant he was happy to leave things as they were and be questioned when he hadn’t met the number or had to lose margin to achieve it.
So, what can you do if this is happening to you?
1. Identify the criteria for a truly forecastable deal
List the criteria that that truly reflects the components of opportunity to give you a reality check (and grade it) to test the strength of a sales forecast, for example: How accurate is the forecastable timeframe in the first place, if so, what underpins this?
- What is the real strength in the relationships we have?
- How distinct is our solution in the eyes of the prospect?
- What value does it add in comparison to our competitors?
These questions will help you to breakdown the components of a forecast in order to get a reality check.
2. Measure forecast versus achieved
Create a Forecast to Order Ratio for the sales team and individual members. Then measure this on a daily/weekly/monthly/quarterly/annual basis depending on your sales cycle to help you compare perception versus reality over time.
3. No surprises
Get agreement in your sales operation for individuals to take more responsibility for forecasts to reduce the element of surprise. This can often marred by over optimism, a lack of knowledge about the target account’s buying criteria or desperation. This can be supported by a robust forecasting process which looks at evidence based interaction with prospects.
It’s easy to tell someone what they want to hear, but companies lose millions each year on business that could have been won at higher margins if the underpinning of the opportunity was stronger.
In order to gain an advantage the strength of the business relationship and the true understanding of a target account’s needs will help to improve your selling opportunities.
Think about changing the ‘culture’ of the way a forecast is communicated and accepted. By taking the time to re-evaluate your forecasting process you may end up with something which increases the confidence of your sales team and your forecasts as well as adding substantial amounts to your bottom line!
Julian Clay
Get in touch: 01273 284400 or contact@salestosuccess.com