The accuracy of your sales forecast impacts everything in your organization from revenue projections to hiring and production capacity decisions.
Yet more than 80% of companies missed their sales forecast in at least one quarter in recent years. Research shows that one of the main causes of this is outdated practices that many companies are still using to develop their forecasts.
It can seem as though accurate forecasts are an impossible dream, but that doesn’t have to be true. If you want to improve your sales forecasts, try these five steps.
1. Get on the Same Page
The first step to improving forecast accuracy is getting your entire sales team working from the same playbook and speaking the same sales language.
Define key sales terms and stages and communicate this to the team. Make sure everyone understands exactly what constitutes qualified leads, sales process stages, and forecast categories (commit, best case, pipeline).
Then, establish clear forecast protocols including a regular cadence for forecast reviews. Define specific data points required for each forecast and establish clear deadlines for forecast updates.
2. Define Your Sales Process
One of the leading causes of missed forecasts is bad data. You can’t expect an accurate prediction if your data isn’t accurate to start with.
One of the key steps toward clean data is clearly defining the stages of your sales process. You should have objective entry and exit criteria for each stage based on customer actions.
The Brooks Group’s IMPACT Selling® program breaks the sales process into six steps that are easy to remember and provide clarity during coaching conversations about opportunities.
Define a time limit for each stage so opportunities that have been sitting in the pipeline for too long can be phased out and not be included in forecasts. Opportunities that stay in the pipeline past their expiry date lead to bloated forecasts.
Your sales team should know the stages and criteria like the back of their hands to manage their pipelines strategically. If they do, they’ll be able to accurately place each opportunity in the correct stage. Train and reinforce the correct use of entry and exit criteria to keep the data clean.
4. Compare Forecast Models
In addition to a sales forecasting model based on a weighted pipeline, check your numbers against both capacity and historical data.
Sales capacity refers to your quota-carrying headcount tempered by attainment rates. A capacity-focused model can help identify errors in the sales forecast and/or help validate the accuracy of your numbers.
You can use historical close rates against your current open pipeline to help determine whether your weighted numbers accurately reflect known trends.
Together, the three models can help you understand where you may have blind spots and create a more accurate picture of the likely future.
5. Hold Salespeople Accountable
Require each salesperson to prepare and commit to a written forecast. When salespeople prepare their own forecasts, it requires them to be honest with themselves about the content of their sales funnel.
You can encourage accountability by incentivizing results that fall within a certain percentage of the salesperson’s forecast.
Be careful to balance accuracy incentives with incentives that encourage aggressive goals, and don’t penalize salespeople who occasionally exceed their forecast. A friendly competition for the most accurate forecast can be a good way to accomplish this.
How to Improve Forecast Accuracy
An overly complicated forecasting system will discourage compliance. Instead of requiring salespeople to record massive amounts of information for the purpose of forecasting, take the time to identify the factors that truly impact the forecast.
Hold salespeople accountable only for those factors, make it simple for them to track this data directly inside their CRM workflow, and make it easy for managers to retrieve the data for analysis.
Accurate forecasting can be challenging, but, with these steps, it’s not impossible. Once your data is clean and your forecasting process is clear, your sales organization will be better equipped to provide the rest of the company with the critical numbers they need to operate profitably.
Contact us to see how The Brooks Group can help you and your team improve forecast accuracy.
