Accurate sales forecasting continues to be a moving target for most sales organizations. In the last few years, web-based research has impacted the buying process and the buyer’s proactive ability to identify their own problems and solutions much earlier in the cycle. As a consequence, traditional sales forecasting models have been severely disrupted resulting in an epidemic of unmet sales forecasts.
Currently sales organizations are spending an inordinate amount of time, creating their weekly, monthly and quarterly forecasts. Even so, experts say that these forecasts are historically incorrect. According to 4Growth’s research in sales effectiveness and best practices, it takes constant tweaking, perseverance, creativity, improvisation, and vision to build a consistent sales forecasting process.
Predictive sales analytics, financial modelling, combined with business intelligence are now replacing gut feel, instinct, hunches, and market experience as competition continues to increase in B2B sales environments.
Sales organizations use various methods to “get to” the number. Here are the top 5 activities we recommend that will allow organizations to increase their ability to meet their respective sales forecasts:
1. Multiple Forecasts and Accuracy
In many cases the sales forecast touches a number of departments each with a unique set of requirements and priorities. Sales managers are driven by revenue and opportunity. Operations are interested in logistics delivery and fulfillment. Product marketing is interested in the increased (or decreased) demand for a specific product line. The CSO needs to have the tools and capability to shape and assess the true value and accuracy of the forecast. At the end of the day, the CSO and CFO need to agree on a number that is acceptable. This requires a comprehensive vetting process and there is no “one size that fits all”. Collaboration at all levels is essential in assessing the accuracy of the sales forecast.
2. Flexible and Adaptive
Companies that have increased their sales forecasting accuracy have done so with a great deal of discipline and sales rigour to ensure their forecasted close percentages continue to rise. There are numerous processes that companies follow but the most successful companies treat forecasting as a moving target and are constantly tweaking, modifying, re-evaluating, and augmenting their process based on industry and competitive market forces. Sales leaders must understand their sales process, product marketing, operations, customer behaviour, and the individual capability of each member of their sales team in order to provide more accurate sales forecasting. CSO’s can’t rely on past performance and revenue run rate – they need to consider numerous factors that are impacting their company, market, and industry.
3. Coaching versus Number Chasing
Most companies avoid forecast fire drills by planning specific dates for sales forecasting discussions. These meetings may be held daily, weekly, monthly, quarterly, or on an ad hoc basis. According to CSO Insights, sales managers spend most of their time “chasing” the numbers rather than spending quality time with their sales people on account strategy. Many sales managers are so focused on the forecast spreadsheet, that they lose sight of the opportunity to build a better sales team through quality coaching. New forecasting tools are available that if implemented correctly, allow sales leaders to spend more time strategizing and closing business vs. chasing reps down for updated spreadsheets.
Sales people involved in complex selling environments don’t want to spend an inordinate amount of time learning new processes. Change management can be a daunting exercise for most sales teams. When upgrading to the new sales forecasting tools that are available we recommend that companies implement these changes in stages. The key to ensuring success for adoption of new sales forecasting methodologies is the need for total buy-in from the line managers. These are the regional VP’s, District Sales Managers, and team managers. Without the consent, engagement, and commitment from this group – the change will be delayed and productivity and forecast accuracy will be degraded. It is essential that buy-in be achieved throughout the organization.
Increasing a company’s sales forecast accuracy is an incremental process. It may take months of continuous adjustment and learning before gains are realized. CSO’s need to lead and manage their respective sales organizations efficiently with a strong mandate to improve quickly.
The forecasting fire drill will no doubt continue for some companies. Organizations that embrace these new process methods and sale effectiveness tools will quickly develop a competitive edge over their respective industry foes.
By Gary Collins