How Do You Forecast - Hope vs Reality?

I just read a blog entry by Liam Venter from a New Zealand consultative sales training firm called SalesFish titled Milestone forecasting: An alternative proposal to sales forecasting. In the post, Venter proposes that sales forecast percentages should be based on achievement of certain milestones in the sales process. To summarize, if you make a product presentation (and you normally close 30% of the prospects to which you give product presentations) you would forecast that opportunity at 30%.

This is the sales forecast methodology I normally associate with Solution Selling when I first took that course back in 1992.

It looks pretty good and, in fact, I coached some of my early clients to use that method. There's a problem with it, however.

It ignores the politics that more often than not influence a sale when the prospect committee gets together to make a decision. Power players throw their weight around. Technical influencers try to feature/benefit the deal to death. Finally, the decision is made by a single decision-maker or group that wields the most political power - regardless of the rock-solid value proposition and ROI analysis you put forward. This is especially the case for complex, high-dollar, competitive transactions.

At our firm we coach sales managers to go through a methodical and continual opportunity review process with sales reps. Among the questions we want to see answered are "Are we winning this deal? If not, what can we do to make sure we do win this deal? Whose opinion needs to be changed? Who do we need to influence? Are there people with whom we have relationships outside of the prospect that can help us win?"

Another question that needs to be asked is "Can we win this deal?" If the answer is "No," then you need to get out of the deal as soon as possible and find another deal you can win.

The deals that remain in the pipeline after this review should only be those deals that you ARE winning and that you CAN win. Then, the forecast is not made up of percentages, but rather commitments - deals you WILL win!

The forecast is then made up of two components - how much and when?

So, I contend that the sales forecast is binary. It's 0-percent or 100-percent. You either win the deal or you don't. I have never won 30-percent of a deal.

What are your thoughts? How do you make sure your sales forecast is as accurate as possible?


Jim Cundiff
The Complex Sale

Jim, I agree that the sales forecast is binary. I might even agree that anything in-between is wishful thinking.

Jim, I've seen the math work when the forecast is being rolled-up (especially to the national level). But it seldom works at the individual SR level.

When the template applies 'X'% to certain scenarios, it works at the team level because it acts as an "average". By definition, it can't work month-over-month at the individual level.

This is one of the reasons why a "lexicon" is required for the sales group. It's a much more comfortable forecasting teleconference when we're all using the same nomenclature!

Earlier this year, I left a large S.I./reseller. The team carried a quota of $17mil. I worked with the team to make forecasting an ongoing task (vs "once/month"). Given the level of passion, we anguished over numerous entries to the forecast. Through the campaign, we saw eye-to-eye on each entry because I knew that I'd be hand-on-heart with the National Manager!

In my experience, the process tends to bog down when you use percentages: it's simply NOT a science. Sun Microsystems used to publish (internally) the definition of "suspect" meaning 0 to 75% (I think) and "prospect" was 76% to 99%. The were cast in stone that NO suspects should be in the forecast!

I'm not quite so blunt as I want to see the pipeline including suspects but there is always discussion on what it's going to take to move this one along to the prospect level. More importantly, what time lines/activities are associated with that account.

I would take the cream from the SR's forecast and add it to a page in my daily dashboard. In this fashion, I knew where we were MTD/YTD and what was in the pipeline to cover the delta.

I know that it felt painful initially but, in order to get my full support on all the other topics, it was made clear to the team from the outset that forecasting was critical to me.

Good luck & Good Selling!
Pat

Originally Posted by jcundiff I just read a blog entry by Liam Venter from a New Zealand consultative sales training firm called SalesFish titled Milestone forecasting: An alternative proposal to sales forecasting. In the post, Venter proposes that sales forecast percentages should be based on achievement of certain milestones in the sales process. To summarize, if you make a product presentation (and you normally close 30% of the prospects to which you give product presentations) you would forecast that opportunity at 30%. Jim Cundiff The Complex Sale

Jim not sure if your being a bit of a wag or not. But in my original post that you quote
Milestone forecasting: An alternative proposal to sales forecasting. I specifically make the point that "milestone forecasting is particularly suited to a selling methodology that recognises sales are the result of a series of steps or processes. Each of these steps or processes could be said to have a percentage effect on the positive outcome."

So if as in your example a sales person makes a product presentation and they give a waiting of 30% to that single milestone activity, this WOULD NOT give them a forecast success value of 30%. To give the sale a forecast success value of 30% the average of waitings for all milestone activities would need to be 30%. If the other wieghting were less than 30% the forecast success value would be very low.

What you select to use and measure and milestones will be particular to your product and business environment. In a complex sales situation where you need to deal with multiple decision makers and influencers (who may all have different compulsions and recquirements) it would be sensible to include the appropriate milestones that acknowlege these issues.

I have found properly implemented milestone forecasting can be incredibly accurate across an organisation as well a being a very useful tool to make sure that the sales person is covering all of the bases.

I guess you understood that anyway and my blog gave you a platform to get across your valuable point.

regards
Liam