How to Improve Your Sales Forecast Accuracy in 5 Steps
The accuracy of your sales forecast impacts everything in your organization, from revenue projections to hiring and production capacity decisions.
It can seem as though accurate forecasts are an impossible dream, but that doesn’t have to be true. Join Steve Hackett, RVP of Sales and Rich Recchio, Director of Marketing, as they outline 5 steps you can take to improve your forecast accuracy—so you can make effective decisions concerning resources and the direction for your team.
In 19 hyper-focused minutes, we’ll cover:
- Tips for cleaning up your data so you’re not blindly throwing darts at a target
- Ways to optimize forecasting models to understand where you may have blind spots, and create a more accurate picture of the future
- Ways to coach your salespeople that will improve their individual forecasts
- Why the KISS principle can be beneficial for your accuracy and your sanity
Read the Full Transcript of the Briefinar Below:
Rich Recchio: Hello, and welcome to Briefinar for sales leaders. We promise to be brief, bright and bring it all to you in 19 minutes or less. Today we're gonna be giving you five steps to improve your sales forecast accuracy. I'm joined today by Steve Hackett, Regional VP of Sales. Steve has been a driving force in The Brooks Group growth for nearly two decades. Steve, thanks for joining us today.
Steve Hackett: Thanks Rich, glad to be here. Richard, there is a constant theme in our sales management training programs, managers tell us that their hardest job is predicting sales forecasting numbers, and predicting them accurately. So I think this is just a great topic for us to discuss.
Rich Recchio: I agree, let's jump in.
Steve Hackett: I love this diagram, this picture here. You know, don't be that guy, don't be this guy. As a sales manager, sometimes it feels like we're just shooting arrows at a bullseye to predict accurate numbers in our forecasting. In some cases, they feel like it's almost like the impossible dream, but it doesn't have to be that way. As a manager, we like to think that you're gonna sleep better at night knowing that your sales team numbers are correct. You know that's what your goal is, and there is a way to do it.
Rich Recchio: Steve, sometimes I feel like I got a blindfold on when I'm doing some sales forecasts, but I can certainly feel this way, and this picture's pretty accurate in how I felt in the past. You know, but fear not everyone, we're gonna give you some great tips today, that will allow you to get feeling more confident when you go to create your forecast.. So, let's jump right in into this.
Steve Hackett: So number one, clean up the data. Garbage in, garbage out. You know, one of the leading causes for misforecast is just bad data. You start out bad, and it just gets worse. You can't expect an accurate prediction if your data isn't accurate to start with.
Rich Recchio: That's exactly right, Steve. So how do you recommend folks clean up their data?
Steve Hackett: Well, the first thing Rich, is to do this. We believe that you need to clearly define the stages of the sale or the opportunity in your sales process. Knowing where you are, and where you're going, is absolutely essential to have in the first step in an accurate forecast.
Rich Recchio: Well you mentioned that it's essential. Why is it essential? How does it help?
Steve Hackett: So think about this, there's an objective entry and exit strategy for each stage of your sales process, based upon the customer's actions. Your sales team should know what stage and what criteria, like the back of their hands. If they do, they'll be able to accurately place each opportunity in its correct stage. Training, coaching, and reinforcing accurate use of entering and exit criteria with your sales people to keep the data clean. All to often an organization will invest in a CRM system. They'll bring it into the organization with minimal training, and even less follow-up. It's interesting, Rich, this past week we actually had a consultant come in, and we've been working with this consultant group for a period of time. They're working with us to take our CRM system and elevate it with additional training. We've refined it, we're adding more things into it, we're streamlining it, but it's gonna be constant reevaluation and upgrades to where we are, so that we can improve the efficiency and the accuracy of our CRM system.
Rich Recchio: Yeah, so is training ... When it comes to our CRM system, making sure that everyone's on the same page, we know how to use the tool the best way. That's really where you're gonna start to see the results, and see the impact of everything moving forward.
Steve Hackett: Additionally, you need to define the time limits for each one of these steps, so that the opportunities that have been sitting in the pipeline for too long can be phased out, or not included in the forecast. As sales people, I'm very sensitive to this, and most sales people are overly optimistic. Opportunities that stay in the pipeline past their expiration date lead to bloated forecasting.
Rich Recchio: That's exactly right. You know, in this slide here, this kinda illustrates how we use the steps of IMPACT with our CRM. So, maybe tell us a little bit about this, Steve.
Steve Hackett: Well literally, this is the steps that we go through in our process, our sales process, but what we really look at is the funnel down below. We're always looking at a 30 day, a 60 day, and a 90 day funnel. We'll actually be able to predict the potential for each one of these opportunities by the steps of the system that we teach or we practice. We know that over a period of time, and we've been doing this now for a number of years, we can literally get down to the step in the system, the potential accuracy of the opportunity for that deal to close within a timeframe, and we track it within our funnel. So this is a ... This sheet right here is what we live off of, in terms of our own internal forecasting. So step number two, we really need to get granular. You know, this is an interesting topic, and you know, if you just zoom down and we look at the steps on how to implement this, it starts with factors like analyzing the ones that are gonna directly impact the closing of the deal. We look at things like the size of the deal, the size of the company, the industry, their sales cycles. The number of [inaudible 00:05:49] that will be involved in the decision-making process, which is something we've seen, Rich, really increase over the last few years. More people involved in the actual decision-making process, which all have an impact on what the probabilities are going to be. By tracking and analyzing this data, you can begin to understand which factors have the biggest impact, and weigh your pipelines accordingly.
Rich Recchio: I'd agree. All great stuff, Steve. Let's look at an example here. So, depending on the CRM that you use, you can identify, organize and access your success indicators to improve your forecast accuracy, and make more informed decision. You can even create a dashboard that gives you a quick view into the info that you need. So, if you look into here, this is a lot of sales stuff, but in my world, I'm in the marketing side of things. We have a lot of KPI's, or key performance indicators, that we're gonna be tracking, and that we need to look at as we go along. So, things like marketing qualified leads, opportunity pipeline that we're, you know, of leads that we're bringing in, what do they bring to the table? You know, the lead cost that we have associated with each one of these coming in. Close one, close loss. These are all examples of data that's critical for us to be seeing from a high level, and know whether we're on track or off track, where we might need to dive in a little bit, get more granular, and take a look at some of the finer data inside of it, to help us make decisions and move in the right direction, and make sure we're on point with everything.
Steve Hackett: Boy, aren't these great looking graphs? I mean, there's no limit to the number of graphs that you can have, but I will emphasize this. For managers, don't be afraid to share this information with your sales team, they have a direct impact on the success of your organization, and they need to be as familiar with these graphs as you are as their leader.
Rich Recchio: I'd agree. From my standpoint, the marketing team here, and the sales, we're all sharing this data and these graphs so that we're all on the same page, and we can have better communications and can move forward together. All right, so step three, optimize your forecast model.
Steve Hackett: Yeah, you know, there's a lot of different forecasting models that you can use, and one isn't necessarily better than the others. It's a good idea that you experiment a little, and find out which model or which approach works best for you and your team. Whichever model you choose, here are some tips that will make it more accurate. Remember, the goal is accuracy. Number one, use historical data to determine realistic sales forecast. Past sales are not always accurate predictors of future performance, but historical data is a solid foundation on which you can stand, as you weigh additional, unpredictable factors, and could increase or decrease sales in the coming year. Rich, we were talking about a few opportunities that we've come across over the years, that due to no planning on our own, all of a sudden, this big whale just shows up in our lap. But, you know, to predict that it's gonna happen next year, or two years, or next quarter, may not be the most accurate thing to do.
Rich Recchio: Yeah, you know, every once in a while, we get some of those whales come through, and it's always nice ... it's a nice boost to the old opportunity pipeline, but it's the ones that you're gonna repetitively get and know what you can count on, that it's gonna help you to drive for growth.
Steve Hackett: It's great when Christmas comes to a sales person.
Rich Recchio: Every year.
Steve Hackett: Consider the best and worst case scenarios. Our sales forecast should always consider the best and worst that could happen. Scrutinized last year's numbers, what went exceptionally right last year, and what might not happen this year? What could potentially go wrong this year that might set you back? It's an evaluation.Work backwards to determine how many leads you need to achieve as expected numbers in sales. Let's look at this one on its own, and show you how you can incorporate your marketing team into this process.
Rich Recchio: So here's an example. As a sales person, you know, you need to close 100 deals a year, that's gonna be your quota for the year. Historically, your sales people have closed 10% of your deals with qualified leads. So, in order for you to hit your goals, you're gonna need to generate 1,000 qualified leads to make 100 deals.
Steve Hackett: You know, there's a term that's some organizations use, it's called participation. Participation simply means you've quoted a deal, you quoted on an opportunity. Now, if you're able to participate in more qualified opportunities, your closure rate will be higher. Looking at the numbers that you used in this example above, if we're able to increase our closing rate on qualified leads from 10% to 20%, we'll need to only generate 500 qualified leads to make the 100 deals. So, it is the numbers that we need to measure, the quality of those numbers, what our ability is to close and work those numbers. They all come into predictability in the forecasting.
Rich Recchio: I agree. Great point, Steve. From a standpoint of bringing this all together from a marketing and sales standpoint, the two teams should be working together to identify goals into the new year. For example, you know, from our standpoint here at The Brooks Group, we didn't coin this phrase, but we have some marketing meetings here. That's where sales and marketing gets together to plan to strategize, to talk about what's going on in the world that's surrounding us, and how we can help to make sure we're bringing the best value to our customers. A lot of the things that happen is we sit down, we plan for the year, we talk about what is the business plan for our sales reps, how can marketing support that, what is gonna be driving our activities on a marketing side. When we go through identifying a sales rep, sales person's closing percentage, or how many deals they need, it allows us to figure out how many leads we have to bring in, what's the budget, how much is it gonna cost us to bring that in, so that we can set it across the table and have everyone on the same page.
Steve Hackett: Speaking of the sales team, we really appreciate those marketing meetings that we go to, because there's constant feedback on the leads that are coming in, the quality of the leads, other areas that we should be exploring. We're really talking about it, and if this is not happening in your organization, you need to make it happen as a sales leader. I feel like we're in great alignment. Rich, you've talked about alignment between marketing and sales, and you spend a lot of time with the executive team, and also the sales team, to make sure that we're constantly giving each other feedback, so that we're in alignment as we move forward, and make course corrections, frankly, if we have to. Make course corrections as we go forward.
Rich Recchio: It's a lot smoother to make those corrections when we're all communicating together as well, so ...
Steve Hackett: No question, and there's no finger pointing in that meeting, like, "Where are all my leads?" Or, you know, "Why don't we get to a million dollar leads in organizations?" That's not it at all.
Rich Recchio: Where are the leads? I hear that in my nightmares, Steve.
Steve Hackett: Well, we just wanna be consistent and be in alignment.
Rich Recchio: Absolutely. All right, so step four, holding sales people accountable. What are we talking about here, Steve?
Steve Hackett: You know, when sales people are involved preparing their own forecast, they'll actually take ownership of it. We see all too often managers or organizations will actually give a ... get a forecast or what their budget's going to be, without any type of feedback from the sales people. You automatically ... you're putting the sales people at a disadvantage to begin with.It requires sales people to be honest with themselves about the content of the pipeline, the information that will help you to improve your accuracy of the team's forecast. So firstly, you should require each sales person to prepare and commit to a written forecast, to get constant feedback on that forecast, and how they're progressing against the goals that they've established for themselves, and the organization has established for themselves. You need to encourage accountability to the forecast, by incentivizing the results that follow within a certain percentage of the sales person's forecast. We all know that sales people get paid on their performance, but, you know, if you can balance this kind of carefully with the accuracy of the incentives ... with incentives for encouraging aggressive growths, I think you can come up with something that's gonna be pretty attractive to all people. If the sales people can go above and beyond their forecast, the company's gonna benefit, the sales person should benefit, the entire organization benefits from these aggressive goals. Don't penalize sales people who occasionally see their forecast. We say that all too often, they get a pat on the back. Well, you know what? There's times in a sales cycle where some sales people may be up, others may be down.If you approach this from a team aspect, and from an organization aspect, the balancing act between all of them is gonna be in the best interest, not only of the sales person, but also of the organization. A little friendly competition for most accurate forecasts can be a good way to accomplish that, and recognition in your sales meetings. Most reps will shy away from making changes to opportunities when the news isn't good, so encourage honesty by rewarding it.
Rich Recchio: That's a great point, Steve. All right, step five. This is always one of the best ones, keep it simple. Let's talk about why this is so critical, Steve.
Steve Hackett: That's right, Rich. An overly complicated forecasting system will actually discourage compliance from your reps. Remember that your forecasting doesn't have to be hyper-complicated process that involves high level mathematics and projections. Instead of requiring sales people to record massive amounts of information for the purpose of forecasting, or for other departments, take the time to identify the factors that truly impact the forecast, and make sales people accountable only for those factors. We use a term that a confused sales person sells nothing, a confused buyer buys nothing. It's hard to be ... predict accuracy of your forecast if we don't take those things into consideration. Additionally, make it simple for them to track the data directly inside of your CRM workflow, and easier for managers to retrieve that data and those analytics. This will save you and your team's sanity, since a simpler system is easier to stick to, it should improve your accuracy as well.
Rich Recchio: I'd agree, Steve. So really identify the KPI's, the key performance indicators are gonna allow you to see from a high level whether or not things are going on track or off track.
Steve Hackett: Accurate forecasting can be challenging, but with the steps we covered today, 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.
Rich Recchio: Awesome. So let's recap a little bit of this in the steps that we did cover. So, number one, you're gonna wanna clean up your data. Step two, get granular, step three, optimize your forecast model, four, hold your sales people accountable, and five, the most critical piece, keep it simple so everyone knows how to work it, and you can move forward with everything.
Steve Hackett: You know, Rich, we didn't really touch on this specifically, but there are some underlying themes to all the steps that we covered. It's the ability for you and your sales people to speak the same language. It's critical that your team is a consistent ... has a consistent sales process, so that the data is being entered correctly, and you can accurately gage how likely it is that the opportunity will close. We train our clients in the IMPACT selling system. It breaks the sales process in the six easy to remember steps that provide clarity during conversations about opportunities between sales reps and their managers.
Rich Recchio: That's right, Steve. Of course, we use the system ourselves with our sales team at The Brooks Group. It's something that contributes significantly, not only to our team's selling success, but also to their ability to keep clean data and forecast accurately.
Steve Hackett: Because we've been doing this so long Rich, we now have the ability to take a look at each step in the system and evaluate each opportunity within those steps of the system. We can come right down with a percentage, the opportunity for close and the percentage based on each one of those steps, and how qualified the opportunity is.They've been refined, we refine them from time to time, but they've been very consistent for the last five years. Now, IMPACT is even more accessible and convenient, because we've adopted it to an eLearning format. It's really unique and engaging experience for your reps, and we're thrilled with the response that it's gotten so far. The system has won multiple industry awards, and we're extremely proud of it. If you're interested in the program, or any training program from The Brooks Group, please feel free to reach out to me. Steve@thebrooksgroup.com. Remember we said keep it simple? Steve@thebrooksgroup.com, and I can set you up with a free trial. Thanks for joining us today. Rich, been a pleasure being here with you today.
Rich Recchio: Absolutely, Steve. Thank you all so much, and we look forward to seeing your future.