You can’t run an efficient business with out good forecasting. Having visibility of what future revenues looks like is a critical dashboard element. Unfortunately, more often than not, sales teams miss their forecasting number. Organizations miss their number because everyone has a different perspective on how to measure it. By the way, I’m not talking about the “street” forecast. That number is easily 10-25% lower than what the individual sales reps are calling. It’s so much lower because Executive Management has learned sales reps can’t forecast. Executives build in a buffer to make sure they don’t miss. If companies forecast what sales teams do, they would never meet their street number.
To improve forecasting accuracy, you need to stop worrying about what the reps think. It doesn’t matter if a rep thinks a deal is going to close in the next month. It doesn’t matter if they think the prospect is going to choose your solution. Sales people are just that . . . people. To count on gut, intuition, interpretation of data or hope isn’t going to get a good forecast. Forecasts should rely on data.
Sales cycles are personal to a company. Each business, solution, product or offer has it’s own unique, personal sales cycle, one that is personal to the corporation or company selling. They key to understand your companies unique sales cycle is to do the research. If you do the research, what you’ll find is there is a series of events that WILL and MUST happen or the deal won’t close. These events or triggers are gold in measuring the probability of closure.
To find these triggers or events you have to unwrap the entire sales cycles. Interview your best and brightest. Shadow reps from start to close. Create a graphical representation of your sales cycle and plot ALL the events occurring from start to close. Over time you will begin to see your companies unique sales cycle emerge. Along this plotted line, patterns will emerge. You will notice certain events present in every sales cycles. You will see some events are present in most sales cycles. Other times you will see events present in only a few cycles.
Once event patterns start emerging, look to see where in the sales cycle they are showing up. Are you seeing them early? Are you seeing them just before the close. Where and when are the events happening? What starts to emerge is your companies unique sales cycle.
Now take a look at the deals that closed and look at the events that were always or mostly present. What events happened 75% of the time a deal closed? What events happened 100% of the time a deal closed? What events happened only 25% of the time? You got it. This is your probability. A probability built on data. A probability of close and forecasting accuracy far more accurate than a sales led forecasting pipeline. What you’ll find is the consistent events early in the sale cycle indicate a lower closing probability and those later in the process indicate a higher probability of close. The key, know what your companies own unique sales cycle is.
In the world of sales, I trust my sales teams. They know how to sell. They know how to build relationships. What they don’t know how to do is forecast. When it comes to forecasting deals closing, I doesn’t matter what my people think. I listen to the data.