The Secret of Accurate Forecasting

The single greatest point of stress for sales people and sales managers is forecasting; and the desire for accurate forecasting often drives the decision to implement CRM. Yet as Jason Jordan writes in his book Cracking The sales Management Code:

"You cannot manage by results. You must instead manage the activities that achieve objectives which in turn create the results.

I see insane behaviour when it comes to forecasting and sales managers with a flame-thrower approach are just as bad as 'professional visitor' sales people who adopt a strategy of hope. Telling people they must hit their number does not make it happen. Often it drives poor behaviour from the sales person with their prospective customer that either lowers the price permanently or damages the relationship.

This funny video below is courtesy of Jason Jordan and shows how wishful thinking from the sales manager does not make bigger forecast numbers a reality.

What's the secrets of accurate forecasting? Here's what I advise my clients and their sales people to focus on:

1. Build relationships of trust with the right people, which means knowing the decision-makers and those with power of veto (the ones who can say 'no'). Also have everyone covered who is part of the 'consensus base' (the recommenders).
2. Understand the buyer’s evaluation and selection criteria as well as their approval and procurement process, as well as the political power base inside the organisation... back to relationships.
3. Be competitively aware and ensure you are creating best value for the customer; and that they view the investment as a high priority that is backed by a compelling business case.
4. Manage risks. When do key people take vacation? What could possibly go wrong or cause them to defer or ultimately choose to simple allow the status-quo to prevail? Will a competitor do something stupidly desperate? Remember that 25% of qualified opportunities are lost to 'do nothing'.
5. The forecast close date must be from the customer, not a creation of the sales person. Why is that date important to the customer and what happens if it slips? Be very skeptical of close dates that are on the last day of the quarter.
6. Build a close plan. The short video below from me talks about the concept.

Stress from inaccurate forecasting comes from not fully understanding the buyer’s processes and timing and approval gates inside their organisation. It’s a giant mistake to try and inflict our timing and needs on the buyer; we need to work with them on with what I call a close plan, other people call it a win plan.

In essence, you take the same mindset of building a project plan and you sit down with your executive sponsor or maybe initially your coach inside the deal that you’re working on, and you talk their language about the outcomes that they need to deliver and the dates by which things need to be in and working. And then you start to go backwards, you say, “Well, if we need to go live by this date, when would we need to sign off on user acceptance testing? When would we need to start to build a proof of concept environment and finalise that?” You keep going working back until you eventually come to the date that they need to sign a contract, not for your reasons but because of theirs.

So, the key to achieving accurate forecasting is to understand the customer’s procurement process, their timing, their approval gates, and the dates that matter to them rather than us. I find it incredible when I look inside CRM systems and see so many close dates on the last day of the month or year. Here in Australia nobody’s working on the 31st of December, it’s our summer Christmas close-down vacation period.

We need to make sure that the dates are the customer’s dates and then work backwards. Build a close plan but don’t call it that. Name it a 'Project Alignment Plan' when you print it out, and take it to the customer and ask them to validate it, then you can forecast with confidence and you can say to your boss hand on heart that you understand what needs to happen for this particular deal to come in on time.

How Do You Assess Someone's Forecast?

Run a CRM report that includes all of their closable opportunities for the forecast period... then review the following:

1. Include the following fields in the spreadsheet or CRM report: Deal Stage, Win Probability and Status/Next Steps (free text field).
2. Ensure all 'Next Steps' include customer actions and that the sales person actually understands the buyers process and approval mechanism. Don't allow them to assume or hope. They need to know and be engineering the outcome with someone inside the customer organization.
3. Challenge anything with a close date that is soon yet the deal stage is early in the seller's or buyer's process. Does the sales person truly understand the client's evaluation and selection criteria as well as their approval and procurement process?
4. Ask why the particular date has been selected for the 'close' / win. Ensure there is no confusion between being advised that you have won and the customer actually making a contractual commitment or providing a purchase order.
5. There should be 2-3 times closable business compared with the budget/quota/target number that needs to be achieved.
6. Ask 'what could go wrong and have you assessed all the risks in this slipping or being lost'? Do we know who or what we are competing against (traditional competitor/s, other internal projects for funding, or apathy / status-quo)?

Here is an example of deal stages and remember that deal stage does not equate to probability of winning. The 'qualification score' should be used to determine the probability of winning. Deal stage on the other hand is useful for testing and validating the close date. Remember that we can only manage activities and it is best to align with the customer rather than seek to pressure them.

"All business is done at the speed of trust"

Avoid inane 'cadence calls' that add no value to anyone and just waste time and create unhelpful pressure. Coaching is the most important role of a sales manager. The illustration below from The Sales Management Association is excellent and makes the point that probability needs to be added into the equation.

Here are three of my other posts that may also be of use as you seek to improve sales forecasting:

• How NOT to run a sales meeting
• Why a sales manager should be fired
• Why a sales person deserves to be fired

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