Revenue forecasts remain elusive - CEOs report that their pipeline forecasts are about 50% accurate. This is a real shame considering the fact that teams with accurate sales forecasts are 10% more likely to grow their revenue year-over-year.
The root causes of the problem lie beyond what advanced technologies and sophisticated algorithms can fix. These are three steps you can take to generate more accurate sales forecasts.
The prospect requested the demo. You figured out if there was budget and need. An additional call was held to “dive deeper”. Then, the proposal got sent out. At this point in the sales cycle there is a 40% chance of closing, according to the CRM. But alas, the prospect never responded to the proposal and even if they did, it was months down the road. Sound familiar?
You’re not alone. What I’ve described above is a workflow approach to the sales cycle. The seller takes certain steps and moves the deal forward in the CRM. The CRM assigns arbitrary probabilities to closing based on the stage that the deal is in. What’s the key ingredient this process is missing? The customer!
The customer or prospect is the one responsible for acting within the account you want to sell to. Their actions move the sale forward, not the workflow of the sales person. I woke up this morning, ate breakfast, grabbed coffee and got to the train station. My actions had nothing to do with why the train was delayed.
Had I accounted for the malfunction at the train station ahead of mine, it would have allowed me to better predict the arrival of the train and get to the station at the right time. It is no different in sales. You have to account for the actions of the customers and use those actions as cues to move the deal in your pipeline. Accounting for the customer’s decision journey is the very first step to more accurate revenue forecasting.
The biggest reason that technology fails to deliver more accurate forecasts is that the algorithms used need good data input. Accurate and consistent data input from sellers into the CRM is a dream for most organizations, not a reality. In fact, most sales people keep two separate records for their opportunities - one they report and one they use as their actual records for reference.
Sadly, we can’t blame sales people for this bad habit. Entering good notes take time the sales person seldom has so they default to their own personalized version of it. They don’t see an inherent benefit in using the CRM. Organizations have to make it advantageous for salespeople to maintain accurate notes in the CRM. The way to do this is through implementing sales funnel stages that are reflective of customer actions.
Basing your sales or funnel stages on the customer decision journey means that there is room in the sales funnel for opportunities to move backwards, not just forwards. Customer actions are not always linear so it’s vital that sales people have the freedom to move opportunities back if needed. This creates a sales pipeline that is also a strategic tool to inform what opportunities to prioritize and when.
You can try financial incentives for accurate forecasts but if the seller knows that their funnel stages are a strategic tool that can help them win more deals, they will be more inclined to enter accurate and timely notes into the CRM.
Perhaps the biggest reason that sales forecasts are inaccurate is that the funnel is filled with opportunities that don’t even belong there. Just because a prospect talks to you does not mean it’s an opportunity. Often times in complex sales, if that one prospect is actually enthusiastic about your solution, it still does not mean that it belongs in your pipeline.
Change is the engine that creates opportunities. There needs to be a change that is compelling the company to act now in order to solve a problem that you can help with. There needs to be an organizational commitment to changing now. That is the minimum requirement to call something an opportunity.
Qualification does not end there. Qualification is not a step in the sales process, it is the process itself. Sales people need to ask themselves this after every sales interaction: is this still an opportunity? Is there still an organizational commitment to change and can I win this business? If the answer is no, then close that opportunity and pass it back to marketing.
AI and the advanced software on the market is a great boon for our industry but we are not prepared to fully leverage it. No algorithm is good enough to overcome human errors. Embrace the customer decision journey into your sales organization. Use it to create your funnel stages. Let your sellers know that it’s advantageous to enter accurate and timely notes. Embrace qualification as a constant throughout the whole sales process. If you do all of those things, your revenue forecasts will be more accurate.
Read the eBook:
Sales Forecasting Fixed: Take the Guesswork out of Revenue Forecasts