Why Your Sales Forecasts Are Usually Wrong And What To Do About It
Why your sales forecasts are USUALLY wrong…
…and what to do about it
If your forecast is usually way off the mark you’ve got 3 choices…
1) Gain a greater understanding of why sales forecasting is usually wrong and what you can do today to improve things across your business.
2) Do nothing and hope you get it right next time (rather you than me)
3) Join the Met Office where you should fit in just fine.
In this article we’ll focus on the first option. Understanding Why. We’ll look at some key factors that affect your ability to produce an accurate sales forecast.
YOU ARE NOT ALONE
This challenge is certainly not unique to you. As a matter of fact, sales forecasts are usually always wrong. And that’s ok. They are essentially educated guesses for the most part, based largely on common sense, so you don’t need to hire Einstein to work it out for you. If you and your data sources are very realistic, you can make a sales forecast that provides genuinely useful numbers.
SO WHAT ARE THE ROOT CAUSES OF POOR FORECASTING?
1) INCONSISTENT QUALIFICATION
There are three very valid points here:
Everyone likely has different standards and benchmarks regarding what qualified sales opportunities are and what constitutes ‘qualified’ to what degree.
Sales qualification is treated as a one-time event. We ask the questions early to qualify Prospects in. It is not treated, as it should be, as an ongoing process right up to the finish line, which can lead you to a whole load of trouble.
Sales forecasts are conducted taking into account your teams individual agendas (driven by targets and optimisim) and not the client’s agendas on key deals.
2) MISALIGNMENT OF TERMS, STAGES AND LANGUAGE
Your team of 10 all come from different backgrounds. They’ve had different training and been conditioned in very different ways. Their habits, experiences and successes are all very different.
Does everyone in your sales team understand one sole definition for each sales related term you use in your business? Ask them and find out.
What are your qualification criteria – commercial and technical? How is it satisfied? Is everyone really aligned to them and does everyone use and understand them in the same way? Do they have a universal understanding of the mechanics of your lead scoring system or the fundamental requirements necessary to move opportunities through your processes and pipeline stages?
If not, then they will surely be forecasting their deals differently won’t they? That means the data is flawed to start with so a sales forecast based on those numbers is going to be way off the mark when the end of the month comes.
3) THE INPUT
If it’s not in the CRM, it doesn’t exist.
Funny that as most companies you see have staff that hate their CRM system for one reason or another. If your sales function is governed by numbers, as all are, you need to make sure you’ve got all the sales data present and correct at any time. That means accountability.
CHANGE YOUR FORECAST OR CHANGE YOUR BUSINESS????
The question you need to ask yourself isn’t “Why is the sales forecast wrong”, it’s “How wrong was the sales forecast”. Just take a sec and reflect on those two questions.
The answer to your first will most probably be ‘I don’t know’ but the answer to the second will give you something to work with. Do you change the way you forecast sales or do you optimise the people or processes that feed the forecasting system to provide more predictable output?
ARE YOU DOING THIS?
1) Use a simple, stage driven sales process and pipeline complete with clear definitions of what is required to move an opportunity through to the next stage of your sales process or pipeline stage, efficiently.
2) Make sure you have perfect clarity and alignment of every sales term used in your business by everyone in the company.
3) Regularly coach your team to ensure the qualification criteria and process or requirements by which they are fulfilled is used consistently, correctly and is understood by everyone.
If your team are forecasting deals that don’t close at all, turn your team into Sales Pro’s by qualifying their pipelines with them individually with a view to helping them become experts in identifying good opportunities early until they’re qualification is as sharp as yours.
Use your skills, go through each forecasted deal that is supposed to be closing this month and do what good Sales Managers do. Make sure things are being done right. Consistently. Get bad news early and teach your team spend their time in the right places.
ENCOURAGE DIFFERENT THINKING
Encourage you team to stop thinking about their targets for a second and start thinking about good questions you can ask to really understand your Prospects buying process. How it works and who’s involved in order to help the buy. You need to ensure you’re making contact with everyone or at the very least making sure you understand his or her role in achieving your desired outcome.
INTERNAL NAVIGATION OF COMPLEX SITUATIONS
This is where having a good Champion is priceless; someone on the inside who likes you and your solution that can help you navigate an account internally and give you the inside track. It can be the difference between winning and losing a deal, keeping your opportunity alive and moving or stopping it from stalling.
That’s why we should never stop working on our people skills.
SALES PEOPLE AREN’T VERY HONEST
I don’t mean outwardly, I mean inwardly. Its not intentional. Inward honesty is one the core behaviours or abilities that underpin the best of the best Sales People but it also requires a certain level of discipline and doesn’t come naturally to many people. That’s not to say they’re not inwardly honest about other things in their life but a lot of Sales People kid themselves by viewing their pipelines through biased eyes, telling themselves they’ve qualified when they’ve only asked a couple of questions etc.
A good example of this is when a Close Date is entered next to an opportunity despite the Sales Person having absolutely no idea when the deal is likely to close.
PASS ON THE KNOWLEDGE
Over the years, as you realise how precious your time is, you tend to develop ‘Salesman’s Paranoia’, which encourages you to ask better questions all the time, so you know you’re spending your time where it will provide you the greatest returns.
You realise you’d rather not chase around after opportunities that can’t be closed when you could be creating others that can so you qualify hard, focus on making a Champion out of everyone you come into contact with and work with potential customers to assist their purchasing; thus delivering more predictable results.
It’s up to us as Sales Managers and coaches to teach others how to do the same.
PSTC provide game changers for companies of all sizes specialising in, Sales Training, Sales Outsourcing Solutions and Sales Consultancy Services for companies big and small. If you need help optimising your sales process or systematising your sales function, talk to us for objective advice.
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