'Why Can't I Get an Accurate Forecast?'
Just last week, I heard that very comment from the president of a new client. Frankly, it is a common phrase I have often heard from CFOs, presidents and vice presidents of sales. So what's the answer?
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 (in CRM or 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 the 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 not have a defined closing plan for active opportunities.
- The salespeople are closing on topics (e.g., price) instead of he compelling reason the prospect has for your product/service.
What's the Action Plan?
First, as the sales leader, there are some obvious actions to take and some not so obvious. The first action is not to ask for a forecast. Remember that forecasts are like the weather person on TV -- they have just so-so odds of being accurate. Instead, we suggest asking for a commitment. This is how we recommend teaching this: 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 says, "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 phrase to each of the salespeople on the team. After all the salespeople have forecasted the sales leader says, "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" versus a forecast.
Second, we recommend that you begin to track each month's commitment by salesperson. Do this for at least four 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 of each salesperson and 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 are 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, in 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 salesperson the hard questions 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 is to use these -- print them out -- during the weekly sales meetings and then make sure each salesperson has their own copy for their use. Each time that any opportunity is discussed, it is critical the sales manager continues to use the checklist 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 are the next two 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 weaknesses?
- 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.
Posted by Ken Thoreson on April 23, 2015 at 11:26 AM