Many sales organizations often struggle with how to predict which sales will close. Their sales forecasts are weak, or non-existent, and that fact affects their bottom line.
Your sales forecast impacts many choices in your company’s sales process. A poor sales forecast not only influences commission payments but also the overall success of your organization. It can be difficult to determine which sales will close or which leads will qualify. Yet, when done correctly, an accurate forecast helps a business stay on track by using past data to predict short- or long-term results.
To improve the quality and accuracy of your sales forecasts, here are 7 steps to follow to ensure your sales forecast accuracy:
1. Use consistent definitions
When your inside sales team uses the same definitions (like what counts as a good lead or a qualified opportunity), it’s easier to rely on your data. By reviewing your past conversion rates—overall, by industry, by location, by representative—you can better forecast future conversion rates and sales from upcoming opportunities. The whole sales and marketing team must grasp these definitions, and sales management should regularly ensure they are applied.
2. Know your sales cycle length
If you get a good lead today, when will it likely close? This week? This quarter? This year? Many inaccurate sales forecasts get this one piece of data wrong, meaning your conversion rates are accurate but don’t take place in the window of time you assumed. You eventually get the revenue, but not at the time your organization was expecting it. By building in a typical (or even conservative) sales cycle length into your model, you’re making it easier to map expected sales to the week, month, quarter or year in which they’re likely to land.
3. Read market changes (and their impact on closing behavior)
The model you built last year might not work this year. If market conditions are weak, sales cycle length may have spread out. If budgets are tighter, an earlier decision maker may need permission from the CFO to take action now. These changes can wreak havoc on your sales forecast if you don’t anticipate, identify and adjust both behavior and expectations as a result.
4. Require a “compelling event” to become an opportunity
The right contact at the right company in an ideal market can surely benefit from your product or service. But do they want it? Is it a priority? Is there something internally that is driving urgency and prioritization of what you’re selling? Requiring a defined “compelling event” for new opportunities may reduce the volume of opportunities created, but it also increases the likelihood that those deals will close, which in turn makes your forecast far more accurate.
5. Conduct regular deal reviews
Sit down with your sales reps and walk through their pipelines. Not just names and numbers, but context. Ask for the back story, why they’re qualified, what the compelling event internally is that’s driving action. This isn’t about not trusting your reps. It’s about establishing a culture of accountability, learning and collaboration.
Make these deal reviews about helping your reps brainstorm new ways of accelerating deals, establishing greater urgency with latent opportunities, and creating greater income opportunities for them personally. In the process, you’ll have a more intimate idea of the quality and accuracy of the pipeline.
6. Make updating the forecast fast, easy & mandatory for your reps
Opportunities change after they’ve entered the pipeline. Close dates move out. Or up. Deals that were on a fast track suddenly slow down, and perhaps should be moved back to an earlier stage. Most reps don’t want to make these changes to opportunities in their CRM system, as that may imply weakness in their own pipelines and selling skills.
Instead, make it easy and mandatory to make these changes in real-time. Make it clear to the sales organization that these changes will help management improve selling conditions, and address real-time changes with the resources needed to close more business.
7. Reward accuracy and honesty
Very few sales organizations reward pipeline performance & behavior. They compensate based on closed business, but not based on how close reps come to their forecasts. Create incentives for your reps to accurately forecast their expected sales. Foster an environment where honest changes to forecasts, even if the news isn’t good, is encouraged and rewarded.
Would you now reward a rep for reducing their sales forecast? I hope so. Imagine the alternative, that they led you to believe their output would be much higher when they knew they couldn’t deliver.
What strategies and tactics have you used in your sales organization to improve sales forecast accuracy? What would you add to this list?
