We love to criticize weathermen and women for the inaccuracies of their forecast. But we always tune into the weather on TV to see if we need a jacket tomorrow or we check our iPhone or Android weather app to see if we’ll get wet on the bike ride we want to take in a couple of hours. Studies have shown that weather forecasting beyond a day has limited accuracy, and yet we still get upset when the five-day forecast is wrong.
Tell a sales professional that his/her sales forecast is off and prepare for a long discussion as to why that’s just not true. I know of what I speak, that was me for many years. Most sales reps have high confidence in the veracity of their forecast. Yet, like the weather forecast, the sales forecast is just as fragile.
See if this story sounds familiar:
A sales rep finally gets a meeting with a coveted account – ABC Corp. The meeting is with a manager who has the responsibility of gathering information in advance of a possible new project. The potential project, if the sales rep understands it correctly, is, in fact, in the wheelhouse of the sales rep’s company’s core competency, so it should be a win, or so thinks the sale rep.
In the meeting, the sales rep learns when the project is supposed to start, the expectation of when it should be completed, and some basic requirements. Still seems to be a good fit. So, the sales rep offers to do a demo of his/her company’s solution. A date is scheduled and the rep comes back to the office humming a happy tune.
Into the CRM system goes the ABC Corp. opportunity with a 60% chance of success. Why? Because the company has dictated that an opportunity can’t move to 60% until a demo is scheduled.
What’s wrong with this story? Here are Just a few highlights to get you thinking:
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The sales rep has no idea what how ABC Corp will measure success on this project
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The key decision makers are unknown. We know that the project manager is not the decision maker. He/she might be an influencer at best.
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The sales rep may or may not (most likely not) understand how ABC Corp measures value
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The sales rep doesn’t really know if the project is funded. If they are like most sales reps (me included early in my career, and, sadly, sometimes even now), he/she has blinders on and myopically focused on the size of the opportunity and the highly visible new customer.
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On and on.
The flip side of this story is the sales rep knows that he/she needs to get this opportunity in the forecast to show his/her manager they are making things happen. One of the things this sales rep is measured on is the “size of the forecast.”
Your forecast is of little value unless it’s based on sound business principles and common sense. As you’ve read in prior articles, we know from research by organizations like Accenture, Gartner, Corporate Visions, and others, the following about sales forecasts:
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85% of opportunities in the forecast will never close
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88% of CFOs have little to no confidence in the sales forecast
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The expected buying cycle is 97% longer than expected
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The biggest threat to your deal is not another company, it’s status quo bias
If forecasting is still so inaccurate, why don’t we change how we do it? Good question. Some companies are starting to do just that. How?
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They have identified their ideal customer profile and target those organizations that fit that profile, eschewing ones that look attractive on the outside, but actually don’t meeting enough of the criteria to be a true prospect
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They have built business cases based on the Voice of the Customer and know why their customers buy from them and what value their solution delivers (based on the metrics their customers deem most important).
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They have identified the critical business issues their solution addresses (again, from the Voice of the Customer) and they build sales stories that focus on those critical business issues.
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Their sales stories disrupt the status quo bias and help their customers see the status quo is no longer safe.
Companies that do the above experience very accurate forecasting. The best of the best report 90% accuracy. Even if your company doesn’t get to 90% accurate forecast, doubling or tripling your current 15% hit rate leads to huge benefits. Not only will you quit wasting valuable resources chasing opportunities that will never close, you start seeing your deal size increase and your sales cycle decrease.
If you’d like to experience a big boost in your forecasting accuracy, let’s talk.
Meanwhile, it’s supposed to be sunny and nice this coming weekend.
