The report revealed that leading companies have been able to turn this into profit by:
- Increasing overall team attainment of quota by 12.6% ; compared with 2.3% decrease for other companies
- 9.1% average year-over-year increase in annual gross revenue per sales person; compared to a 1.5% decrease for other companies
The effect poor sales forecasting has on business performance
Sales Forecasting tools are used to insert structure and rigor into what is often no more than a degree away from a best guess forecast of sales opportunities. Too many sales managers spend an incredible amount of time, energy and effort at the end of each quarter working with their sales people to close deals that their forecasts indicate should be closed. This push for closing business late in the quarter often results in higher levels of discounting, commitments to service levels beyond the norm or unusual payment terms, all of which have a negative impact on revenue, cash flow and profitability.
The key to eliminating these issues lies in improving the process and using the subsequent insights or business intelligence gained from the tools used to achieve this.
CRM (Customer Relationship Management) systems in themselves don’t provide the answer to poor sales forecasting and the related poor business performance. Most organisations have developed some form of sales “process” that might look something like this:
CRM systems have been deployed to track sales opportunities as they move through the various stages in a sale (in some cases CRM’s also manage the documentation and activities related to specific opportunities in the pipeline). The focus is on the sales person - what your sales people needs to do keep the opportunity moving forward to a position where it is closed. Herein lays the key problem: CRM system takes little or no account of what your customer needs to do for you to consider the opportunity having moved forward. It’s therefore very likely that your sales people complete all the steps outlined in your CRM to consider themselves in the “Closing” stage of your sales process, only to subsequently find out that the customer is till back in some early stage of say “impact analysis” and your sales team had no idea.
Closing the Gap
You can’t eliminate every surprise during the sales cycle, but you can minimize the impact of such surprises by anticipating and identifying the potential for them earlier and responding faster. AS a minimum, this involves creating a sales process that embodies the following fundamental capabilities:
Introduce metrics that indicate alignment between the sales and buying process. The key here is that you assign definitive checkpoints of achievement which are measurable by specific and indisputable outcomes that have been done jointly with the customer, or are easily witnessed and validated by your sales teams. To be effective, these checkpoints and verifiable outcomes cannot be just about the customer, but instead must involve the customer. Using checkpoints and verifiable outcomes allows you to effectively measure and, subsequently, manage your progress, making the sales forecast more accurate because it has achieved a certain status (a checkpoint status) instead of being at a certain stage (e.g. somewhere in “negotiation”). Categorizing an opportunity that’s in the ‘negotiation stage’ as “80% likely to close” is a risky venture in forecasting as the “probability of close” isn’t really associated with where the sales person has placed it in their forecast… it’s all about where the customer is in their readiness to place the order.
Provide global continuity with local flexibility. Selling in Mumbai or Beijing is different from selling in London or Amsterdam. While there are legitimate cultural reasons for selling differently, it shouldn’t be at the expense of a predictable forecast. Your process should allow the flexibility to be tailored by geography or line of business, but also serve as a consistent framework for forecasting and monitoring progress.
Opportunity Risk Assessment. Just as a GPS can tell you with pinpoint precision where you are relative to your destination, Opportunity Risk Assessment can tell you where you are relative to your checkpoint milestones. Conducting a quick review of the specific Verifiable Outcomes allows you to identify specific risk so that you can adjust your sales activities as appropriate to correct your course of action This is the roadmap for sales management to coach sales professionals on what activities need to take place to advance each opportunity and provides the necessary data to create a predictable forecast.
The Guesswork diminishes and the payoff is huge.
When your sales professionals understand the process, they can easily identify tasks and action items, understand the risks that they face and make more accurate forecast commitments. Your sales team will know exactly what they have to do to move an opportunity forward and have confidence that these actions support advancing the opportunity and improving the probability of closing the deal as forecast.
From a sales management perspective, there is also a much higher level of confidence in the numbers and the levels of performance being committed to the executive team. Sales managers are able to pinpoint the problems and risks earlier, minimizing surprises that may occur late in the sales cycle. It also helps managers to better assess and understand the needs of the individuals on the team so the team can be appropriately coached.
For your executive team, more consistent and reliable forecasts enable accurate exception setting with shareholders, managers, employees and market analysts. It also provides better visibility into sources of revenue production and potential revenue challenges.
And, of course, to a customer, a supplier who is synchronised with their buying process, working alongside them at the customer’s pace, raises the customer’s confidence level that the seller will remain a strong and reliable partner.
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