The world is one big melting pot of BIG DATA. Increasingly human behaviours are managed using algorithms that predict the information people want to see and what they are likely to purchase. Forecasting behaviours and outcomes are now big business – fin-tech solutions, retail systems and sales management tools have all been designed to predict outcomes and mitigate risk. With all of this capability why is it still so difficult for businesses to forecast accurately? And does it matter?
A common complaint we hear all the time from CEO’s and investors “why can’t the sales team hit their forecast? Why does the forecasted number keep moving out and dropping in value?”
There a many reasons for this but the most common reasons are:
- Not enough coverage
- The sales team aren’t qualifying objectively because they don’t know what they don’t know – they aren’t identifying the objections the purchaser isn’t telling them
For all businesses accurate forecasting is the foundation for success, it:
- Identifies how healthy the business is
- Helps plan additional investment
- Provides confidence for management and potential investors
- Indicates early if something isn’t working so there is time to adapt and change
The hard thing is forecasting accurately. Below are Trinamo’s top three tips to deliver an accurate forecast.
1.Have enough Pipeline
Typically, a business will need to receive a multiple of thousands of hits to their website in order to close tens of deals, as shown by this SaaS worked example:
Without a high level of traffic, the cascade of real opportunities into the pipeline is reduced. This means with mathematical certainty that the sales target will not be achieved. It will also drive the wrong behaviours. Sales people eager to reduce scrutiny will focus on ANY or ALL opportunities rather than objectively qualifying out early and only focusing on the REAL opportunities.
2. Know what you don’t know! (Then find a way to work out the answer!)
- the marketing team are driving enough people to the website and
- there is enough coverage to feed the sales team
The sales manager must ensure that sales people are qualifying correctly and methodically making sure they know what they don’t know!
This requires a deep drive into the most important opportunities.
A good sales manager should spend most their time:
- Meeting with clients at a high probability of closure – this will provide an opportunity for a new set of eyes to re qualify and ratify forecast accuracy
- Run pipeline scrubs with sales staff to really drill into the top opportunities and understand where there are gaps in knowledge that need to be researched
- Run deal reviews – for large complex deals there needs to be deep dive deal analysis to strategise and practice potential objection handling scenarios to overcome the competition
- Manage next steps – day to day management of the various next step tasks that come from the above activities and ensure the sales staff are actively progressing opportunities and increasing the probability of closure.
3. Ensure there is enough data to accurately forecast sales
At the very least can the sales person and their manager answer these four questions
- Why will this business buy anything (what problem are we helping them solve)?
- Why will they buy from us (and not a competitor, or do nothing)
- Why will they buy NOW, in the timeframe we are forecasting (and not in 6-12-18 months’ time)
- Do we know how to get all the sign-offs the buyer’s procurement process demands?
- we have only spoken to users and influencers
- we don’t know the decision maker and budget holder
- there is no budget available
Then it is highly unlikely an opportunity will close soon, whatever the forecast says!
In addition, use leading and lagging indicators to check that all the correct activities are happening to improve forecast accuracy:
Then , back up this rigour with reports on key conversion metrics, to confirm that individual and team performance is delivering as expected:
- how many hits there are on the website to
- how many suspects are being turned into marketing qualified leads (MQLs) and
- ultimately how many opportunities are being won
By applying these three steps, forecasting accuracy will improve as will the ability to identify key constraints across the marketing to sales pipeline.If you want to learn more about how Trinamo can help you reach your sales and marketing goals, check out our free marketing and sales growth consultation!