Sales Forecast Accuracy: 3 Obstacles You Need to Overcome

Sales Forecast Accuracy

An important predictor of consistent sales success is the ability to set, manage and meet expectations. This holds true whether you are customer facing, dealing with executive management and especially with investors. The pattern no one likes to see is a sales forecast that starts high in week 1 and gradually diminishes as once promising opportunities push out into an uncertain future.


Sales Operations develops the forecast analysis to close the gap between deal-level commit and revenue using a weekly cadence and robust monthly operations process. Fortune 100 software company


Career longevity in sales begins with entering each new quarter with sufficient pipeline to forecast quota with confidence. First, make your quota – then go for upside. Is that sandbagging? No, and here’s why. The political reality is the negative impact of falling short far outweighs the potential benefit of forecast heroism in week 1. Better to be known as someone who can be counted on to make quota and is always in a position to capture some upside in the last 2 weeks of the quarter.

Here are 3 major obstacles and how you can overcome them.

1. Fundamental Flaws

When you see custom demos, proposals and trials going out without a corresponding level of customer commitment, you know there is a discipline breakdown at first-line management. Does your sales process have Exit Criteria and Verifiable Outcomes that demonstrate the prospect is making progressively more meaningful commitments right along with the sales team? The key to keeping the selling and buying process in lockstep is the quid pro quo. At every stage, the sales team is negotiating access to power and validating the customer buying process to ensure they are aligned. Much like handling objections, every time a prospect makes a request there should be a qualification and a reasonable ask in return. These are coach-able skills that require consistent accountability by senior management during the weekly sales cadence.

2. Too Many Choices

The typical corporate sales forecast is only 81% accurate, even at 11:59 PM just before end-of-month/quarter.  -Peter Ostrow, Aberdeen Group

Whether you currently enjoy rapid growth or face headwinds, accurate forecasts rely on personal accountability from the front line sales managers. Keep opportunity management simple and meaningful and you’ll never have an SFDC compliance issue. Too many shades of gray in sales forecasting undermine personal accountability and ownership of the forecast.

When you offer up choices like…

  • best case, worst case
  • commit, soft commit, hard commit
  • stretch, omitted, bankable

…you are obscuring the truth with jargon and avoiding facing reality. Yes, there are thousands of variables that affect a new logo sale. Instead of making it more complicated, try making it more clear and simple.

In Sales, anything short of a Yes is a No. Nothing improves clarity on a forecast call more than taking an ambiguous situation and forcing a binary result. Sales managers and individual contributors make forecasts – it defines the job. Is this deal in your forecast – yes or no? Especially for net-new business, eliminate deal-level commit and take a portfolio approach. Commit to a forecast amount underpinned by the actual deals that get you there and accept you will have movement in and out of the forecast category. Keep the focus on making the number.

You really only need 2 SFDC forecast categories: Forecast and Upside.  For mid-cycle CRM changes, just phase out the categories you don’t need.

3. Guesswork

The two dominant variables for individual deals are opportunity Amount and Close Date. The honest truth is they are difficult to get right at the outset of the buying cycle for the simple reason that even the prospect doesn’t know the answer with any certainty.

On your next forecast call, listen for tells that indicate the salesperson is introducing their own bias into the forecast equation. This is almost always due to management asking questions like “How do you feel…” and “What do you think…”
Whenever you hear those words, change the focus of the question.

“When you asked the prospect,  <insert qualifying question>?  Exactly how did they respond?”

You will either learn more about the customer point of view or create an action-item for the next week that will give your forecast a reality check. Minimizing subjectivity in the forecast is a matter of discipline and emphasis, but you need to do it without crushing the positive outlook and optimism of your sales team. Think like a coach, not a critic.

Take-Away

Forecasting is sophisticated, high-stakes guessing – your career depends on being smart about it to ensure that resources are allocated to the right opportunities. Validate and triangulate every assumption about close dates and opportunity size. Make it part of your sales culture and the integrity of every data point in your sales forecast will be improved. When times are relatively good, it’s easy to become complacent. For anyone who didn’t enjoy 2000-2001 and 2008-09, now is the time to tighten up your forecast.

Resources:

Article: Weighted Forecast: Objective Science or False Sense of Security?
Article: Forecast Close Dates
Article: Salesforce.com: customize forecast categories
Chart: Forecast Accuracy

It was difficult to narrow the scope of this article down to 3 forecast challenges. The next 7 factors that may be undermining your sales forecast will go out to Subscribers in the weeks ahead.  If you are not already enrolled, sign up now to ensure that you stay ahead of the curve. You’ll also get instant access to the 2014 High-Tech Industry Report on Sales Operations.


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About Neal Murphy

Neal Murphy is the publisher of Enterprise Sales Operations and former VP of Worldwide Sales & Operations with 20 years experience in enterprise technology.

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