Forecasting and sales management tools are fairly common in sales organizations. It is also common to have a deal sitting at 80 percent probability to close for months beyond when it should be. Or, you will see something go from 10 percent probability to won overnight. Accurate forecasting is a constant goal for sales leaders to attempt to normalize.
Accurate sales forecasting impacts many areas of the business. First and foremost it is the only way to determine if the sales organization will meet, exceed or fall short of its goals. If you are unable to see where you will land toward your goals monthly, quarterly or annually, you are unable to make course adjustments to ensure you meet the numbers you are being held accountable to. Secondly, it impacts other departments who may have to service the client once the deal is won. This impacts their ability to forecast the resources needed to execute the SOW. It also impacts their ability to determine if they will meet their goals and objectives. What makes it so hard for sales executives to accurately forecast their prospects (warning some of these are cynical!)?
- The sales executive basis probability to close on tasks that they have performed (meetings, collateral sent, price negotiations, proposals sent)
- There is a certain level of hope involved. This is primarily based on the sales executive’s feelings that the deal will close.
- They are coming up short on their goal so they find ways to rationalize a higher probability to close.
- They have nothing in the pipeline so they inch up the probability in order to have something to talk about at the next sales meeting.
Sales leaders should implement a follow-up process on pending deals. Monitoring the amount of time something has remained in a certain percent of probability to close and requesting updates is the easiest place to start. I have witnessed far too often, that when attention is brought to the probability to close percentage, the percentages start going down and in some unfortunate cases end up in a lost status, yet continue to be worked.
Another way for sales leaders to help their team improve on forecasting would be to help them better understand how buyers buy. Once that has been established, your sales executive can then use milestones of customer behavior and mutual accountabilities when forecasting. For example, moving the probability to close to 90 percent because a proposal was sent isn’t as accurate as reviewed proposal with the prospect. Through the review process dialogue with the prospect will further solidify the expectation to close.
Rather than have your sales team forecast solely based on tasks they perform (or feelings), have them include the perspective of the buyer and where that client is in the decision process.
What steps have you found successful in improving the accuracy of your forecasting? Share you comments below.
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