The accuracy of your sales forecast impacts everything in your organization, from revenue projections to hiring and production capacity decisions.
Yet according to Sirius Decisions, 79 percent of sales organizations miss their sales forecast by more than 10 percent.
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 5 steps.
1. Clean Up Your Data
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.
To begin cleaning up your data, clearly define the stages of your sales process. You should have objective entry and exit criteria for each stage based on customer actions – and your sales team should know the stages and criteria like the back of their hands. If they do, they’ll be able to accurately place each opportunity in the correct stage.
Train, coach, and reinforce accurate use of entry and exit criteria with your salespeople to keep the data clean.
Additionally, define a time limit for each stage, so that opportunities that have been sitting in the pipeline for too long can be phased out and not included in forecasts. Opportunities that stay in the pipeline past their expiry date lead to bloated forecasts.
2. Get Granular
Identify factors that impact the probability of closing a deal by tracking granular data within your CRM.
Factors such as the size of the deal, the size of the company, the industry, and the number of stakeholders involved can have an impact on probabilities.
By tracking and analyzing this data, you can begin to understand which factors have the biggest impact, and weight your pipelines accordingly.
3. Compare 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 to validate the accuracy of your numbers.
You can use historical close rates against your current open pipeline to help determine whether your weighted pipeline 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.
4. Hold Salespeople Accountable to Their Forecasts
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 pipeline.
You can encourage accountability to the forecast 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.
5. Keep It Simple
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, and make salespeople accountable only for those factors.
Additionally, make it simple for them to track this data directly inside their CRM workflow, and 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.
The first step to improving forecast accuracy is getting your entire sales team working from the same playbook and speaking the same sales language. The IMPACT Selling system breaks the sales process into 6 easy to remember steps that provide clarity during conversations about opportunities between sales reps and managers.