Sales Forecasting: From Voodoo to Science

I hear it all the time.  All across the board, sales VPs, managers and business owners are frustrated with the lack of “science” when it comes to sales forecast accuracy.

There are tons of methodologies for training sales reps, but much fewer good or practical methods for improving sales forecasting.  It’s the sales VP (or owner) who has to answer to the Board (or bank) at the end of every quarter—so you know this is a nearly universal point of concern.

Then it hit me.  Increasing sales forecasting accuracy can be scientific—and you can even use the scientific method as a jumping off point (thanks to my son’s science homework for the inspiration)!

1.  Begin With Questions and Research

The scientific method starts with a question – followed by research.

As a sales manager, you ask the most basic question: “Which deals are set to close for the quarter?”  But you also need to ask specific questions—and the right ones.

The “right” questions will depend on your market and product.  Start with your value proposition, product, and sales process—and build the questions from there.  Make sure there’s a rhyme and reason to the questioning—and that it’s geared in a way to get accurate results and answers.

Once you get an answer, your research will come into play.  Does what your rep say align with the history of the customer or your customers in general?  Is the rep generally accurate when it comes to forecasting?  What conversations does your rep need to have in order to close the deal?  Where is your competition in the selling process?  And so on.

2. Test the Hypothesis

In order to test the hypothesis, you must have one stated in the first place.  In sales, your rep might say, “I’m 75% sure this opportunity will close.”

Then you need to test the hypothesis given by your rep—and you do this by having a formal, sales forecasting process in place.

You and your reps need to know the steps—not only for the sale itself, but also for forecasting accurately.  It can be somewhat flexible depending on your reps and customers, but it needs to be defined and known—and in some cases will have to be rigid depending on the market and sales rep.

When your reps come into a forecasting meeting, they need to know which boxes to check off in order to say, “Yes it will close,” or, “I need to talk to these people about these concerns before knowing.”

If you don’t have a process, get one.  Start with your established sales process (you do have one of those, right?) and build it from there.

This is no small point, so let me repeat: in order to have a more scientific, accurate forecast, you must have a specific process for vetting each rep and their forecast.  If you don’t have one, your forecasting will be up to chance, and you will be more prone to “happy ears syndrome”.

3. Analyze Your Data

Once you get your forecasts—or hypotheses—from your reps, do a little more digging and analyze your data from the buyer’s point of view.

Sales methodologies tend to be seller-centric (i.e. knowing which stage the SALESPERSON is in the process).  While they are helpful to varying degrees, you need to have a buyer-centric forecasting process.

If you have a sales methodology you’re currently using, find ways to make it more buyer-centric and focus on where your customer is in the buying process.

• Historically, what has been the buyer’s main concern?  What seems to be their main concern right now?
• Is your sales rep addressing that concern?  Have any new ones arisen?
• Where does the sale seem to be stuck right now?
• Who is the decision maker for the whole deal?  Are there multiple decision makers?
• What would it take to turn their concerned mindsets into confident ones about our company?
• Does your rep’s forecast align with your buyer’s past decisions?

Those are just a few questions to get you started. But remember: analyze your data from the buyer’s mindset as much as possible.

Additional Tips

These aren’t exactly scientific, but they can help get you to closer forecasting accuracy.

• Know Your Value Proposition:  This will help steer your messaging.  It will help your reps align your company’s value to the customer’s value.  It will help you answer the questions you need to ask.

• Zero in on the Red Zone: What are the top deals forecasted to come through this quarter?  Focus your time/energy on those first and foremost.

• Step in When the Time is Right: Sometimes a deal requires you to fly in a day’s notice to meet with the decision maker.  Know which deals are which and when to step in.  This means consistently meeting with your reps to talk about the forecast — not just quarterly, but at least once a month.
  

Sales forecasting doesn’t have to be all up to chance—nor does it have to be an art form that changes depending on the artist (or sales rep or sales manager, in this case).  Find ways to make your forecasting process rigid—and feel free to use the scientific method as your starting point.

• How have you dealt with sales forecast accuracy in the past?

• What other ways have you implemented more accurate forecasts?

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