Every quarter, one of these two scenarios happens to sales managers.
One: You roll up your team’s total forecast for the quarter, but it falls short of quota. How do you make up the gap?
Two: You finish your sales forecast review session with your reps and the total forecast exceeds quota. But 90 days later, you end up missing your goal. Why?
These scenarios occur all over the world to all kinds of sales teams. They’ve happened before and they’ll happen again. And unless you understand the three fundamental reasons why sales teams forecast inaccurately and how you can overcome them, eventually it’ll happen to you too.
1) Lack of Focus on Pipeline Generation
When your team doesn’t consistently focus on pipeline generation (PG) activities each week, there won’t be a steady flow of qualified leads every quarter to forecast the number. The best way to ensure you never have a sales forecast shortfall is to be diligent about PG with your sales team and to work closely with your demand generation team in Marketing.
Every manager knows that not having enough qualified deals entering the quarter means a quarter of extreme stress trying to make your number. The stress of trying to invent deals with customers, pushing clients to buy prematurely, coaxing your team to “do more,” and feeling the weight of impending doom on your shoulders -- you can avoid all of it with good pipeline generation.
So, why don’t sales managers devote time each week to ensure they have enough qualified pipeline deals for next quarter?
Because it’s painstaking hard work.
It’s hard for managers to diligently manage their reps’ weekly PG. It’s hard for salespeople to call, email, network through partners, connect socially, and follow up with and qualify leads. But persistent effort, diligence, and accountability are the only ways to ensure your team has enough deals to make next quarter’s number.
As Mike Tyson said, “Discipline is doing what you hate to do but doing it like you love it.”
2) Inadequate Deal Qualification Methodology
How many times have you witnessed a forecast review session where a rep speaks for five minutes about a deal but their manager still doesn’t understand its exact status, whether the rep is winning or losing, and the likelihood the deal could close in the current quarter? And to top it off, nobody -- including the rep -- has any idea what next steps to take.
If that’s the scenario in your sales force, then you lack an effective deal qualification methodology. Without a qualification process, reps can make themselves -- and their manager -- believe that deals in the forecast will close in the current quarter. The gap between that fairy-tale scenario and reality is a huge obstacle, especially when the lack of process means many reps put together forecasts through guesswork.
That problem becomes more severe proportional to the size of the sales organization. When managers don’t have a process to understand the definitive status of a deal, each manager rolls an inaccurate forecast up to the next level, which simply pushes the problem upward. The likely result is the sales force missing the quarter.
A good deal qualification methodology goes hand-in-hand with your sales process. With a few targeted questions, you should be able to identify which stage of the sales process the deal is in, what information a rep still needs, whether they’re winning the deal, and how to proceed.
Managing deals on a team-wide level without a qualification methodology is like driving to an unknown destination without a GPS or map. Wouldn’t you want to know your exact location, how far you traveled, distance to the next turn, traffic conditions, remaining distance, and if you will arrive on time for your appointment?
3) Sales Process Without Measurable Steps
When reps aren’t held accountable to specific, measurable exit criteria in a sales process, they’ll move deals along at wildly varying rates. It's not their fault -- they truly believe the deal is going to happen.
To make matters worse, reps know they need to forecast at or above their number every quarter. When salespeople don’t have enough qualified deals to hit their quarterly number, they tend to hang onto every deal in their forecast so they have something to present to their manager with the misguided hope of “making something happen” (which rarely happens). You should prepare yourself for their actual sales forecast to be far less than their forecasted number.
If reps prematurely move a deal to the next step in the sales process, you will end up forecasting incorrectly. Your sales process should have tangible actions that act as “gates” between each stage of the sales process.
For example, in the discovery stage, a tangible action could be to send a confirmation email to the customer outlining the discovered pain, the players involved, and the next step in the process.
Without defined gates, chaos reigns. Consider this: If every rep on your team prematurely moved only one deal to the next step in the process, imagine the inaccuracy of the information in your CRM system and your quarterly forecast.
If you don’t have a deal qualification methodology, a sales process with tangible exit criteria, and an unrelenting focus on pipeline generation, your time as a sales manager will probably be unpleasant and short-lived.
How do you create a more accurate sales forecast? Share your tips in the comments below.