April 23rd, 2015
Why can’t I get an accurate forecast?
Just last week I heard that comment from a new client and he was the President of the company. Frankly it is a common phase I have often heard from CFO’s, Presidents and VP of Sales-but what’s the resolution? Many consultants would drag out their “scorecards or methodology” to fix the issue, instead let’s first learn to diagnose the signs and why the problem exists. This is what I generally see or hear when I begin to poke at the problem:
- When you review the pipeline report (CRM/Excel) all the Closing Dates are listed as the end of the month-6/30/15 as an example.
- Beyond your current monthly pipeline values future pipeline dollar values are not listed
- The velocity of the sale or length of time it has been in the funnel is 90 days longer than the average velocity for your business.
- Monthly forecasts by the sales team are always off by a wide margin, when asked, the sales team has no idea as to why they can’t predict accurately.
- The salespeople do have not a defined closing plan for active opportunities
- The salespeople are closing on topics i.e. price, instead of what the compelling reason is the prospect has for your product/service.
What’s the action plan?
First, as the sales leader there are some obvious actions to take place and some not so obvious. The first action is not to ask for a forecast. WHAT? Yes, remember forecasts are like the weather person on TV-they have just so so odds of being accurate. We recommend instead to ask for a commitment. How we recommend to teach this is: during the first sales meeting of the month when each salesperson “forecasts” their sales for that month say for example, $100,000, the sales leader would say: Great!, you hit $100,000 and I will give you a $500 bonus. OK? As expected the salesperson gets excited. The Sales Leader would then say the same phase to each of the salespeople on your team. After all the salespeople have forecasted the sales leader would say: and if you don’t hit your goal of $100,000 each of you will owe me $500! Now that you have their attention you allow them make a new “commitment” vs a forecast.
Second, we recommend that you begin to track each month’s commitment by salesperson, do this for at least 4 months without the sales team knowing you are tracking their commitments, then record their actual sales for each month. By comparing those two numbers you can determine the Forecast Accuracy % by each salesperson and for your entire team. When you have sufficient data, share this information with the entire team and discuss that you will continue to measure this data and it will be added to your Sales Dashboard-assuming you have one!
By tracking this information, your sales team will know that you paying attention to this metric and they will begin to pay attention to the importance of the monthly goal. In sales management what you pay attention to-on an ongoing basis-will begin to impact what your sales team pays attention to.
Third, it takes training. This happens during the weekly sales meeting, your monthly one on one business reviews and in all coaching environments, this has to be an ongoing process and not simply discussed from time to time. What we find is either the Sales Manager is not asking the hard questions of the salesperson or the salesperson is not asking the prospect those pertinent questions. We call them the Magic Questions. They are part of our Sales Management Online Tool Kit, but I want to share them with you to improve your process. My recommendation for the Sales Manager to use these-printed out- during the weekly sales meeting and then make sure each salesperson has their own copy for their use. Each week or each day that any opportunity is discussed it is critical the sales manager continues to use the check list of questions to drive their use into the salesperson’s head!
By using these questions and being tough nosed on making sure your salespeople can answer these questions, both you and the team will have more honest sales discussions.
- What is their Decision Process? (Do you know every step?)
- When do they want to be implemented or have our systems ready to go?
- Who is involved in the Overall Decision?
- Do they have a Business Need?
- Are they Listening to you?
- Do they have Funding?
- What is the Next 2 Steps?
- Who or What else are they considering?
- When is the Next Board Meeting? Or Decision Meeting?
- What are They Doing for me?
- Do I know my Strengths?/Do I know my Weakness(s)
- Do I know Their Decision Criteria?
- Do I have an Excellent Closing Strategy?
Make the commitment to get the commitment and your sales forecast (ugh) will become more predictable and accurate.
Ken Thoreson “operationalizes” sales management systems and processes that pull revenue out of the doldrums into the fresh zone. During the past 17 years, our consulting, advisory, and platform services have illuminated, motivated, and rejuvenated the sales efforts for organizations throughout the world.
He was recently ranked for the third year in a row by Top Sales World magazine as one of the Top 50 Sales & Marketing Influencers for 2014.
Ken has written 5 books, his latest book is: SLAMMED! for First Time Sales Managers, Ken provides Keynotes, consulting services and products designed to improve business performance. Need more sales management resources? Check out his Sales Management Tool Kit or the Acumen Project.