Zorian Rotenberg of InsightSquared performed an excellent webinar on sales forecast which included the best practices to absolutely dominate them. If you want to know how to master a sales forecast, we’re about to open it up with the help of Zorian.
Note, I highly recommend signing up for InsightSquare’s webinar series, they are extremely insightful. The last one included sales scorecards from Trish Bertuzzi.
8 Best Practices of a Sales Forecast
- Forecast by pipeline and not by forecast stages. The pipeline is the meat and potatoes, forecast stages can become too wishy-washy.
- Separate pipeline management vs. forecasting meeting. These two meetings should not be combined into one.
- Know the company’s four averages — these will be explored later in the post.
- Know each salesperson’s 4 performance areas — more to come on these 4 areas.
- Inspect the 6 essential deal metrics — more to come on these 6 essential deal metrics.
- Manage your forecast killers. They’re out there, and they’re dangerous. We’ll look at how to makes sure they don’t ruin your forecast.
- Look for early warning signs. Signs of a tainted and poor forecast will creep up on you…until now.
- Document the process. If it’s not documented, then how can it be improved?
Why is a Sales Forecast Important?
- In order to manage a business effectively, a sound sales forecast is imperative.
- Provides near term predictable future of the busines.
- Facilitates business planning, risk management and helps with budgeting/goal setting
- Drives better business performance due to improved sales performance.
- Helps sales teams achieve their goals by identifying potential early warning signals and risks in the sales pipeline.
How to Start a Data-Driven Sales Forecast
- Standardize opportunity stages based on buying stages. The first step in the sales process is to map your prospect’s buying process. Sales forecasts are directly affected by it.
- Analyze and apply your historical data. Take what you have, however good or poor it is and apply it to your current forecast.
- Define the key metrics that drive your forecast. We’ll explore more of these key metrics in this post.
- Demand accuracy in your CRM such as close dates. Lead by example and mandate that data accuracy be top priority from your sales team. This should be non-negotiable.
- Know the historical accuracy of your team’s forecasts. Anything less accurate than 15% is a cause for concern.
- Separate your pipeline review vs. forecast meeting. As mentioned above these two items should be separated. We’ll explore why.
Why Use a Data-Driven Sales Forecast
- Sales forecasts are much more accurate.
- Salespeople become much more effective.
- The discussion becomes much more objective.
- Higher conversion rates from opportunities to sales.
- Your competition will be outperformed because of faster revenue growth.
- Better business decisions will be made due to more accurate forecasts.
- Tighter alignment among the C-suites due to increased visibility and more congruent planning.
8 Huge Barriers to an Effective Sales Forecast
- Using legacy intuition-based or “finger in the wind” approach. (A sales rep’s dream!)
- Predictable revenue is difficult to create when less than 50% of salespeople don’t make their quota and just over 40% of forecasted deals are won; even when won, it’s not always the deal originally forecasted.
- Insufficient data, inaccuracies and guesswork in the CRM’s will be the death of a realiable sales forecast.
- Spreadsheets are manual, un-scalable, and very error-prone.
- Lack of real-time data (win/loss, sales funnel, sales cycle)
- Sandbagging. Not good in sales or golf.
- Zero accountability. If there’s no accountability, then what’s all this work for?!
- Coaching and training is minimal. Mark Roberge has a great piece on metric-driven sales coaching.
Pipeline Review vs. Forecasting | Meetings
Zorian provides two examples of the ideal frequency for these meetings:
Bi-monthly Pipeline Review Meeting:
When: Every two weeks
What: Review the top of the sales funnel or early stage pipeline for the future period.
Why: Ensure sales reps have sufficient early stage pipeline to hit sales goals
Weekly Sales Forecasting Meeting:
When: weekly, typically each Monday morning.
What: Middle to bottom of the sales funnel or later stage deals far along the pipeline.
Why: Inspect current deals and coach reps to win deals or to purge stagnant deals.
How to Prepare Your Weekly Forecast Meetings
Know your company’s 4 averages
- Average sales cycles
- Average loss cycle
- Average deal size
- Average % conversion from each stage to closed-won
Know each Rep’s 4 Performance Areas
- Pipeline: open pipeline, closed-won, quota gap
- Deal averages: sales cycle, deal size, win/loss cycles for key stages
- Sales funnel: historical % conversation from each stage to closed-won
- Deal analysis: historical opportunity diagnosis accuracy
The 6 Essential Essential Metrics for Data-Driven Sales Forecasts
- Stage – which stage of the sales process is the prospect in?
- Age – how long has this prospect been in the database
- Size – what is the size of this company(revenue/employees, etc)?
- Engagement – how many touches have occurred since the prospect was created?
- Effort – how much time, energy, and resources have been put into this prospect?
- Slippage – is there a theme in the sales process where there’s a bottleneck or drop off of prospects?
Early Warning Signs of a Struggling Sales Forecast
- monthly progress vs. forecast projections
- negative velocity
- struggling salespeople
Tackle Forecast Killers
– time kills all deals: review deal age vs. average win cycles
– track changes/pushes to deal close date: if > 3 pushes
– review deal size vs. average deal: is the deal greater than 3x the average
– if the deal value has dropped by more than 30% after 1st stage, it’s a red flag
– look at stalled engagement: if little activity in last 2 weeks then it’s a red flag.
– check what stage the deal is: if there is little activity in the later stage.
– look at large deals with more than 2x average deal size that are randomly added.
Biggest Mistakes When Creating a Proper Sales Forecast
- Not leading by example
- Not knowing the company or salesperson metrics
- Your team doesn’t trust the data due to inaccuracies
- Metrics are not incorporated into a repeatable process
- Data-driven forecast without overlaying with salesperson’s intuition.
We’ve written extensively on Salesforce Dashboards , The one’s recommended by Zorian are excellent.
- Pipeline for Each Salesperson
- Engagement and Stalled Momentum
- Sales funnel with % Conversions at Each Stage
- Length of sales cycle
- Sales cycle by won or lost.
Dominating sales forecasting is a journey and process that will occur gradually with the right decisions made at levels of the organization.
WideAngle is One on One meeting software used by companies including General Electric, IBM, AT&T, Google, and many more to make sure One on Ones happen, are productive, and documented.