A Critical Metric to Track (in Sales)

That can help shape how, and how well, you forecast!

I think we (the collective we who are obsessed with helping to remove the barriers may prevent reps from creating the best customer buying experience possible) have done an amazing job of identifying ALL of the metrics that should be tracked to ensure that we humming on all cylinders. However, there is one metric that has eluded many of us mostly because it's not that easy to track in your CRM, but it's CRUCIAL to helping you better forecast!

It's called the Velocity Index. Thanks to the HBR (see article here: https://hbr.org/2019/03/sales-teams-arent-great-at-forecasting-heres-how-to-fix-that) and Bob Suh, https://www.dhirubhai.net/in/bobsuh/, there is a new way to identify, track and quantify all your deals which should lead to better forecasting.

Track deals by 'time in stage.'

Do you currently (and accurately track the health of your deals based on how much time a deal has spent in a particular stage?) Perhaps not because it's been exceptionally difficult to do in your standard CRM. However, I'd argue (and thus would agree with Bob and the folks at HBR) that tracking this diligently can and should increase your forecasting accuracy, and thus the health of your deals, TREMENDOUSLY.

As Bob shares, "CRM systems automatically weight revenues by deal-stage (qualification, proposal, procurement) to forecast revenues. The theory behind this is sound, but the practice is spotty. As opportunities advance through a staged funnel, their odds of closing should increase. However, revenue drivers may use different criteria for a stage.

For example, one salesperson may define a request for a price quote as a proposal, whereas another may have a more stringent criterion like the client identifying budget constraints. Both deals are included in the “proposal” deal-stage and ascribed the same odds of success, though they may in fact differ considerably."

Unfortunately, most of us don't continuously and accurately track the actual outcomes of deals at any given stage. For example, if there were 100 deals in a stage that automatically assigns a 25% weighting, did 25 deals actually close? Sadly, most of us can’t answer this simple question because we fail to ask it.

But why does this matter so much? Many executives (ie CFO's) cut or trim the forecast produced by their revenue leaders by as much as 20%. Fixing the forecast this way is crude and based on little more than gut feel and perhaps bitter experience.

As Bob suggests, "Instead of using fixed, stage-based odds to forecast revenues, what if you were to continuously track deal progress and outcomes and use a continuously-fed bell curve to predict the odds of a given deal’s success based on its size and age. In other words, by simply counting the frequency of won deals as a percent of all deals, any new deal can be plotted with more accuracy."

Now what about our favorite Sandbagging Reps (yup we all do it at times, some more so than others) Well he continues to suggest that to prevent it, "create an algorithm that continually tracks the forecasting performance of each individual against the average for the entire group. Have it flag people who over time consistently beat significantly lower-than-average forecasts they have entered. Not only does sandbagging undermine forecasting accuracy, it also deprives the company of growth that might have been achieved through more ambitious sales targets."

Perhaps this is all easier said than done however there are plenty of solutions out there that can help. Bottom line is tracking deals in stage is a very powerful indicator of the real health of your deals, and thus your business.

Curious if you do this today and what impact it has had on your forecasts?