Some might characterize the sales-forecasting process as an exercise in futility.
While sales forecasts are supposed to use historical data to project future reality, the truth is most sales reps end up inflating their numbers to please their managers, even though these goals are often unattainable. As a result, reps and managers may spend hours contorting themselves to project a bright revenue future based on a sales pipeline that is only 25% accurate.
“Forecasting is the most comical thing that takes place in the sales force,” said Jason Jordan, partner at Vantage Point Performance Inc., a sales training company based in Charlottesville, Va., at the recent Inbound conference in Boston. “We have historical data, but we refuse to use it. Even if I closed 25% of my deals last year, I say the likelihood to close new deals is 75%.” As a result, according to ZS Associates’ “Where CRM Falls Short — and What to Do About it,” 41% of respondents said CRM doesn’t provide quality data for sales forecasting.
That may be part of why sales results can be poor as well. According to Forbes’ Sales Performance Optimization Study, in 2013, only 58% of reps made quota. Poor or spurious forecasting methods factor in as well. According to the Sales Management Association, 74% of sales leaders believe their company’s sales forecasts are either only somewhat accurate or, in worst-case scenarios, not accurate at all.
“It’s comedy, but the reality is we have to forecast,” Jordan said. The key, then, is to help improve sales forecast accuracy — and sales managers’ trust in those forecasts.
Tips to help boost sales forecast accuracy
According to Jordan, sales reps don’t have to continue to spin their wheels. There are best practices to avoid the vicious cycle of overpromising and underdelivering. Jordan outlined these principles for improving sales forecast accuracy:
1. Enable sales reps with technology. Use tools like CRM and others to accurately forecast. If you don’t have a spreadsheet or some analytics capabilities, there are other options.
2. Training. Only 28% of companies in a recent Sales Management Association survey said they train sales reps. “If we don’t take the time to define an opportunity and train them on how to use the technology, then, to an extent, we kind of get what we deserve.”
3. Hold sales force accountable for forecasting. Accountability increases sales forecast accuracy by 26%, according to Jordan. Accuracy is sometimes considered part of some companies’ compensation plan for sales reps. Forecasting is an administrative burden, like taking out the trash, but holding people accountable can improve accuracy, Jordan said.
4. Pipeline management. According to Sales Management Association data, only 44% said they manage a pipeline effectively, and 43% said they aren’t adept at managing the pipeline. As a result, sales managers don’t have confidence in the results they discuss with their reps. “I would sleep better at night if I knew all my sales reps had healthy pipelines. If I just had confidence that when people put something into the ‘committed’ bucket that it’s actually committed, I would feel better.”
5. Have a well-defined sales process. Most companies lack clearly defined terms for forecasting. According to data, 42% of companies have a defined forecasting methodology.
“You need to define stages of the process, and how you define those stages is critically important to having visibility into those stages and, more importantly, having the ability to intervene and train people if they are losing a lot of prospects at a certain stage,” Jordan said. “You need confidence that where you see trouble there is trouble.”
Jordan said part of the problem with current sales management is managers get so caught up in tracking and monitoring their sales reps that they tend to forget about the customer on the other end. Jordan said if reps focus on enabling that buying process, they can have greater success.
“The key is to recognize that the sales process mirrors the customer’s buying process,” Jordan said.
SearchCRM: News on CRM trends and technology
The post Five tips to boost sales reps' sales forecast accuracy appeared first on Business Intelligence Info.