How To Improve Your Sales Forecast?

If there is one thing that you could do to improve your forecast accuracy what would it be?

I'll start this thread by telling you what I do and if you like preach!

It's all about focus and there is one thing that you could do to improve your sales results is… Show how you will be making your number.

I want to see a list of deals that you are going to close and the list needs to be big enough to make your number. These are the deals that you commit to closing in your sales period. If you don’t have enough deals, then what are you doing to improve the situation? If you do have enough deals are you certain they will close? Does your customer agree with you?

Showing how you will be making your number is part of forecasting and as such there are three stages for all those quarterly run forecasts. In the first month you have to Frame your forecast, by the beginning of month two you have to Firm your forecast and by beginning of month three you have to Fix your forecast. Forecast accuracy needs to be measured from the Firm forecast – therefore you have to be pretty certain the deals are going to close – and it’s no good calling low and then making your number as that’s just as bad – shows no control.

Three things I look for when people say a deal will be closing. Is there a Business Imperative to which the customer is working? Does the customer agree your Value is greater than your competitors and what Influence can you assert on the decision making process?

The alternative to showing how you will make your number is factoring. Factoring was invented to make you feel better and to make you feel comfortable. There is no focus.

Guess where you focus your time if you forecast which deals will be closing? Guess how comfortable you feel by naming those deals? Guess what you are going to want to do to make sure those deals come in? Try it, it’s uncomfortable, but the focus improves results.

I haven't done sales forecasting before. Thank you for the idea.

What a great question. I do have one note on something you said "I want it to be big enough to meet your number". I think you implied this, but I think it's more important that the number be real than impressive. If there's a deficiency in your forecast, let's deal with it now.

I've seen all types. The guy who falls short of the big impressive number he gave during the monthly meeting, month after month. The person who simply guesses, sometimes wrong, sometimes right. The person who low-balls the number every month and the ones who never stray more than 10-15% +/-

I personally think the biggest factors in accurately forecasting are:

- Being completely honest with ourselves about where the prospect stands at each stage of the sales cycle. Okay, so one person said they would buy. Can they? Who owns the money to do so? Who else is involved? Salespeople have this weird filter on our ears. Someone says "the proposal looks good", we hear "we'll cut the check tomorrow".

- Asking questions. What happens to the contract after I send it over? Who signs it? Are they in the country? What are the clients time-frame motivators? They certainly aren't the same as ours.

And here's the thing that drives me nuts:

- Offering incentives to make us look like better forecasters. You didn't do a very good job asking questions, or chose to hear what you wanted to hear. Now it's a week before the end of the quarter and your boss wants to know where the deal is. After a day or two you mutually agree that a discount/freebie is needed to get that signature. Esentially we're manufacturing a forecast and losing money in the process. If we had done a better job we would have known that the contract couldn't possibly be signed for three weeks and saved us all some stress/revenue.

My apologies in advance for the lengthy and opinionated response!

Justyn

Justyn - good reply!

What kind of sales jobs require regular forecasting?

When I was a mfgrs rep in the electronics industry some of my principals asked for a 90 day rolling forecast, but I don't think anyone really believed my numbers because they were always way off.

Does that mean I am a bad salesman?

Chuck

Not at all. It just meant that organization didn't put much weight on forecasts. You may want to look more into it, as I think forecasting is more important for the sales rep than the management team. By understanding where your opportunities are in the sales cycle, you can better determine where to spend your time.

For example, if you have plenty of opportunities ast the top of your funnel (<20% close probability), but not many toward the bottom, then you can ease up on the prospecting and focus more on moving these opportunities further through the sales cycle.

Justyn

Good input, Justyn.

Today in my quest to sell advertising specialties I'm an excellent example of what Zig Ziglar once called a "wondering generality".

Maybe I should find a book on forecasting commodity sales and put more punch in my system.

Any ideas?

Chuck

In commodity sales (or any sales environment where a single transaction is less than say 1% of your quota) I would think that "funnel" management is more important than forecasting individual deals. When your transactions reach the >1% of your quota (50 deals = 100%) I think it's more important to get better at forecasting individual deals.

I browsed over my bookshelf and nothing stood out as a great resource for forecasting or funnel management. Though any "system" that has a 5-6 step sales cycle will speak to it to some degree. I wish I could point you to something. Maybe I'll include a chapter on it in my next book

Thanks for the additional input Justyn.

I'd say the issues that I have to contend with are the same as those folks who sell printing, insurance or autos.

Lots of competition and lots of choices and few deadlines to create a sense of urgency.

Chuck

A useful excercise might be to take all of your existing "prospects" (people that have at least shown interest in your product). Try to classify them into 3-4 buckets. Maybe: gathering information, high-probability buyer, waiting on paperwork.

By breaking them out into these buckets you can see which areas of your funnel have are healthy, and which ones you might want to spend more time on.

I wouldn't spend too much time with formal forecasting. What you might do though is determine over time, what percentage of your prospects in the last two phases typically close during a month. Let's say 75% of the people who are "waiting on paperwork" will close, and maybe another deal or two will come out of nowhere. Moving forward you can at least make an educated guess on your revenue for that month by taking a look at the last 1 or 2 stages of your funnel. You'll be able to determine how many prospects you need to have at each stage of the sales process to hit your target numbers.

Just an idea.

Justyn