A few years back, I worked for a company that spent more money, time, and effort on sales forecast accuracy than what most companies pay in corporate taxes. There was a complete department that had 3 permanent employees and at any given time 2 temporaries. Why the expense? While most would say spending this amount of money was ludicrous, this company’s accuracy in sales forecasting was 8%. At the time, this was phenomenal compared to other companies in the same industry.
In later years, I worked for a Fortune 500 company that demanded 4% forecasting accuracy. Moreover, they got it too! Being a public company, how the street loved them!
So why are most companies lacking in their accuracy? I think it comes down to a couple of things.
- Pressure to make a number that executives have not been realistic in obtaining.
- Not getting input from the rank and file members of the salesforce.
Too often, I have seen front line managers take numbers, pad them, then pass them upstairs. No two ways about it, this is just plain wrong. I think this is unethical because it is now forcing a quota number on someone that was not involved in the planning process. Crazy idea, but how about getting people responsible for what they were hired to do, generate revenue. When you get the by-in from the sales force, it now becomes a point of pride and ownership. No salesperson I have ever worked with wants to tell their manager they won’t be making their forecast.
Despite loads of money spent on CRM and SFA tools and software, along with hours of time dedicated to reviewing the forecast, it is still way out of line. Why? In all my years in sales, I have never seen a company do a detailed analysis on a territory other than do say “it did $$$ last year and we expect $$$ this year”. What does this say about the coming year, or the next? Nothing, absolutely nothing. When a new sales person starts a territory, unless a detailed analysis has been done, how can a quota be set and handed to them with an honest expectation of meeting that quota?
The fundamental flaw in all forecasting is that we are asking the wrong questions. It does no good to set-up a sales rep for failure from the very beginning by overestimating the territory. This is like having no target; you are going to hit it every time.
When salespeople, especially those who are behind are asked to update the forecast, are you really expecting accuracy? Organizations are kidding themselves if they do. The opposite end of the spectrum has the top reps ‘sandbagging’ or understating their pipeline. The point is, if done correctly, the accuracy is built from the ground up with everyone’s acceptance, and no one has to be double checking numbers.
If this sounds familiar in your company try these:
- Collaborate with the sales force to get ownership of the quota. Supply detailed supporting data so that informed decisions can be made; not what you want to be made. Managers need to remove the pressure from the process. If you do not, the resulting forecast is no more than a subjective and inaccurate piece of paper.
- Quarterly reviews are worthless. The process of review needs to be ongoing and management updated weekly. Clearly establish grading milestones for pipeline deals over a certain amount. Once they reach a percentage level towards close, do an overall review.
- Have an agreement between the salesperson and the customer that qualifies all key measures, conversations and meetings. The process that outlines the due diligence necessary to lead to the ultimate ‘yes’ or ‘no.’ In most cases, any verbal agreement ambiguity from either side removed and now put into writing. Both parties now share and understand with crystal clarity. Every step the customer adds and agrees to adds to the next level of accuracy to the forecast.
Hope you find this useful. Please let me know by leaving a comment. If you have a Twitter account and found this article useful, it would be much appreciated if you would retweet this at the beginning of the article!
Happy Selling!
Ed Warner
With today’s technology, there are far better places to effectively manage your contacts.
With today’s economy, an experienced sales professional (bag carrying or manager) is expected to have a list of contacts. Personally, I keep 4-5 thousand names. Sound like a lot? Not really when you consider my list is broken down into an industry list. Those individual lists are small in comparison to the whole. The key is they are valid!
Let’s face the fact here; these people are going to command $6-figure base salaries. Do you want to pay this kind of salary for someone to cold call or close business? I would hope the latter, but you might be surprised to learn some managers today don’t understand this logic. If you don’t understand this, then you don’t need this level of talent…period!!
When you first encounter a gatekeeper, they usually ask the typical, who you are and what you want. Most will ask you to send some “documentation or some brochures”. To get past this, simply say “I would love to but we do not have the standard type of documentation you typically receive from other companies. If Mr. CxO is interested in saving XYZ% off his bottom line expenses, then I would be happy to discuss this with him and follow up with custom documentation.”
One last item you might try if there seems to be an interest on the part of the gatekeeper, just not the willingness to pass you on. Ccntinue the conversation with the gatekeeper. Educate them on the value of your solution. They can actually pre-sell the idea in your stead.
This last piece of advice to avoid projecting desperation is to fully plan for the type of negotiations you will encounter. The scope of this article is not long enough to cover the topic, but make absolutely sure you understand what is and is not important to the client. From that point you can plan your negotiation strategy. It is unfortunate, but I have witnessed sales managers that have no clue about the art of negotiation. It is not all about getting the sale, rather it is allowing them to buy and they walk away with the perception they have the best deal.