Ahh, the age old question. How to improve the accuracy of sales forecasts. Sales leaders, CEOs, CFOs, CROs, investors, and anyone else interested in running a predictable business have struggled with this ever since I started to pay attention. (And I started paying attention a long time ago, by the way.) I remember it was the day I assumed my first sales leadership role. Previously, I tended to be part of the problem. As a sales guy, I forecasted by using my gut feelings mostly. I walked through my sales process sure, but it was based on my feelings and my conversations, much more than solely metrics. Yes, I was that guy. The sales guy that made sales managers a bit crazy, they were never really able to promise management more than “don’t worry, he will make it happen, he will get to his number, he always finds a way.” Not exactly the most comforting words for a CEO, CFO, or CRO to hear. Now, the tables have turned, I became the guy that had to report to senior management. I was the person that had to put my neck on the line for a number that was based in part on someone’s gut feeling. The problem became, it wasn’t my gut feeling rather someone else's. I had a problem. I had to find a way to forecast accurately, and I had to do it fast.
I must say it was not easy, managing eternally optimistic sales reps operating in the gray area of hopefulness was a challenge that kept me up at night. With few exceptions, I found myself managing people just like me. A mixed blessing to say the least. I turned to some of the basics which helped me succeed in sales and added a dose of rigid execution. Systems, processes, and accountability.
Several years ago and before exiting the company, I assumed the CRO position at QuotaFactory. Responsible for building a scalable and predictable revenue machine. Yes, I said predictable. Here is what I put in place that has enabled me to be nearly 100% accurate in my forecast.
First off, you must have a defined and documented sales process IN WRITING! This should go without saying, but in my experience, this is often not the case. Without this, you will not only be missing an accurate forecast but a very thin one as well. Figure out the best sales process for your product or service, document it, build it into your CRM and make sure it is followed. This won’t be easy, you will likely find you are repeating yourself over, and over, and over. Welcome to sales management. Kind of like herding cats. Most sales reps are just not wired to be systematized, highly organized, or accountable. They tend to be driven and highly competitive, but the details, that rarely exists.
We start our forecast tracking when a discovery call or sales qualified lead (SQL) converts to a next step. My thinking here is we are going to take the time to speak with the prospect again then it is safe to place them on our forecast with a 10% probability. When the next call converts to an additional conversation, which is likely a deeper dive with the same prospect or an expanded audience, we place the prospect at 30%; having scheduled a call with our operations team to discuss potential project scope. A successful next step resulting from this call would likely be a proposal, which we would place at 50%. Most often the next step would be a proposal review, usually with an expanded audience including all decision makers on the prospect side (perfect world). Assuming all goes well in that call and we are able to receive a verbal commitment, we move the deal to 80%. Once the deal goes through legal/procurement we move the deal to 90%. When the signed contract arrives it’s 100% and celebration time!
Of course, a process is just a process unless it is relentlessly reviewed and followed up upon. This is where most sales managers fail. Given many sales managers are former sales reps, it just may not be in their nature to pay attention to detail and nag their reps. I know it does not come naturally for me. But winning does, and if you want to win then you need to be absolutely maniacal about the details, the numbers, and the process. There’s just no other way to succeed. There is always luck but in my experience, the harder and smarter I work, the luckier I get..
Review each deal at each stage with each rep. Ask a lot of questions. Get into the details, ask what could possibly go wrong. Reps love to talk about all the reasons a deal will close. Remember, we are eternal optimists. It’s your job to challenge and vet every deal at every stage with a goal of weeding out the dead wood. I would much rather have a super solid 1m forecast than a fluffy, could happen 3m.
That is my two cents, I hope it helps.