When talking about the sales forecasts, we need to include the entire sales organization, as it is a team effort, and it is also an invaluable perspective. Many organizations worry too much about missing the sales forecast but should instead work on getting an accurate sales forecast.
As the sales forecast identifies as the amount of revenue, a sales team awaits or expects to close over a specified period, often depending on sell-cycle and controlled periodically, usually through a sales pipeline discovery weekly discussion meeting, monthly and quarterly.
Make sure you distinguish Orders from Revenue correctly in your communications, as this appears to be a real issue occurring between CEO, Sales Management, Salespeople, and finance.
Several parameters and criteria used to calculate a sales forecast are historical company data, market analysis, yearly data, and sales representative output. With an accurate and coherent sales forecast, a business can retain a healthy growth level, gain market share, and increase sales turnover.
Lately, some organizations have realized that despite quality time and a large amount of effort, it all still boils down to a failed and missing sales forecast. Even when pressures exerted from senior executives, nothing still works out. Therefore, you wonder, what could account for that?
Let’s start with “Why Are Salespeople Missing Sales Forecast?” I’ll be analyzing a couple of points that could significantly impact the importance of making a sales forecast.
1. The Use of Wrong Forecasting Cadence. Honestly, in talking to clients, many organizations are guilty of getting forecasting cadence wrong. They make use of a structure that doesn’t in any way harmonize with the way their salespeople use it in selling.
Recent research has revealed that more than 85% of B2B companies utilize a forecasting approach that’s primarily dependent on:
In assessing clients’ sales organizations, I have also noticed a pattern that shows that as soon as an opportunity has a price, it becomes expected that 100% of the deal will close on time. Ugh!
Furthermore, even though your company may use a framework that is a bit different from the one mentioned above, there’s still a factor that’s a culprit, which is, basing your forecast on a framework that doesn’t match up with your company’s sales organization expectations.
How can you resolve this?
Consider utilizing this two-step approach of forecasting if you are missing a sales forecast:
2. Your Organization Makes Random Assumptions. Random assumptions are another factor making a mess of sales forecast—irrespective of your forecasting methodology. Your firm needs a mathematical dependency on accurate assumptions.
For example, suppose an organization is basing its forecast on the pipeline of opportunities. In that case, it’s mandatory that you assume a deal size, the probability of winning, and, obviously, the closing date. If these assumptions are off track, your forecast will suffer the same fate.
Important note. Going a bit further into what I check for, have variables that test the salesperson data such as:
Most of my client organizations now work with data and information that can help them check the reasonable deal size, the win rate, and the length of a particular sales cycle for a specific type of opportunity. When you have historical data and are making the right assumptions, your sales pipeline conversations change to healthy predictability, which will help get rid of randomness in your data.
The secret to not missing your Sales forecast starts with getting an accurate forecast and tightening the sales pipeline discovery discussion. Make sure that you don’t base your projections on the wrong methodology. Again, be sure that you use relevant information and data to populate your forecast and not just some faulty assumptions.
I f you have a project or question that you would like to discuss please do not hesitate to reach out to me.