6 Ways to Increase Your Sales Forecasting Accuracy
Sales forecasting is about taking the necessary actions and implementing proper sales techniques to understand, predict, and forecast promising sales.
Forecasting helps you to put things into perspective. It allows you to see both the possibilities and challenges of pipeline management, and then plan your next steps. Accurate forecasting helps you to maintain full control of your pipeline.
However after working with thousands of salespeople and sales managers, we’ve reached a definitive conclusion about most of the sales forecasts salespeople submit…they’re inaccurate and unreliable.
In fact, 44% of executives think their organizations are ineffective at managing their sales pipeline according to research conducted by Vantage Point Performance and the Sales Management Association.
What can you do to increase the reliability and accuracy of sales forecasts?
1. Follow the Sales Process
Sales teams who invest their time in defining a structured and formalized sales process are most effective at managing their sales pipelines, and companies with a formal sales process generate higher revenues acording to a study by Harvard Business Review (HBR).
There is a process in place for a reason. It allows you to have a better understanding of what's expected of you and how to define what should and shouldn't go into your pipeline.
As a sales team, having a set process provides the framework that enables everyone on the team to share the same language when assessing opportunities and discussing the pipeline. This opens commuication and ultimately results in a more accurate forecast because everyone shares the same sales stage definitions.
2. Stop Guessing
The first thing you need to do is stop guessing!
Start off your next meeting by identifying the customer’s buying timetable.
For instance, ask a question like: “Mr./Ms. Prospect, I’m just curious. If you and I end up working together, when do you envision us delivering our service/product?"
The response they give you will help you identify the pace at which you should proceed through the sales process. By understanding the timetable for delivery early on, you’ll be able to more accurately account for what’s going to come in when you say it’s going to come in.
The timing has to be known, it’s not something that should be guessed at.
Give your sales forecast a chance. Collect the right information from the start with our Interactive Information Gathering Worksheet.
3. Only Consider Real Prospects
Many times, prospects will say something that makes them seem like they’re really interested. They might have even started the sales process originally months ago by calling you or going to your website and asking for more information.
But regardless, if at some point the sale is not moving forward, you should start to take those prospects out. You don’t want to include those prospects or the potential dollar amount in the forecast because you can’t confidently say the sale will actually happen.
It might eventually happen, but as a sales gets older it gets more difficult to figure out when it would actually close. Therefore it shouldn’t be included in your forecast.
This goes back to #1 and the importance of having a clearly defined sales process. Your definition of qualified should act as your guide, helping you focus on the right activities and opportunities.
If you start to consider only real prospects that are galloping ahead and not stagnant, then you’ll be more capable of accurately forecasting your sales.
4. Apply a 50% Correction Factor
If you took your entire pipeline of everything that you thought was going to come in, say within the next quarter, and you identified the next sale that was likely to happen, consider what the contract amount would be.
Whatever that number is, take no more than 50 percent of it into consideration. That’s not to say that only half of your prospects will close, but you need to understand there are different sized opportunities.
If you take this approach, your forecast is never greater than 50 cents on the dollar, which makes most sales forecasts already a lot more accurate. Over time, if you see evidence that your number comes in at less than that, you want to change the correction factor, but 50 percent is a good starting point.
5. Remove Old Prospects
The longer a sale goes beyond its normal sale cycle, the less likely it is to happen. As sales begin to get old, they become less likely to happen.
You should begin removing those from your pipeline. It is equally important to start removing those prospects mentally. This means you need to start prospecting for new opportunities.
If you think you’ve got more in the pipeline than you really do, you’ll tend not to prospect enough and the end result will be that you did not bring in enough sales to cover your forecast.
6. Make Friends With Marketing
If you’re a sales professional who is part of a complex buying process, or if you’re targeting B2B prospects, it’s worth your while to not only have a fundamental understanding how digital marketing works but also to make friends with your marketing team.
Organizations who align sales and marketing leads to 38% higher sales win rates, and they enjoy 36% higher customer retention rates (source: MarketingProfs).
The Marketing team creates the content and brand messaging surrounding your company. If you know the story, or the why, behind the content. When you have more knowledge about what type of content your buyers are reading, it will help you establish a consistent voice and pick up the conversation when you’re in front of a prospective client.
Achieving an accurate forecast starts with your pipeline and sales process. Take the time to understand the definitions of each stage of your pipeline and step of your process, only consider real prospects, and ask the right questions in meetings so you're not guessing about information. And last but not least, make friends with marketing - the more both teams are aligned, the better each team does.
Ready to give your forecast a chance? Arm yourself with the right information from the very beginning of your process. Download the interactive worksheet.
About Steve Bookbinder
Steve Bookbinder is the CEO and sales expert at DMTraining. He has delivered more than 5,000 workshops and speeches to clients all over the world and has trained, coached, and managed more than 50,000 salespeople and managers. Steve continuously refreshes his training content to reflect his latest first-hand observations of salespeople across industries and regions. Through him, participants in his workshops and coaching sessions learn the best practices of today’s most successful sellers and managers across industries. Steve understands that sales is a competitive game. To outperform competitors and our own personal best results, we need to out-prospect, out-qualify, out-present and out-negotiate everyone else, not merely know how to sell. Through his specialty programs in Pipeline Management, Personal Marketing, Great First Meetings, 2nd-level Questioning, Sales Negotiating, and Sales Coaching, Steve trains sales teams to master the skills they need to overcome the challenges they face in today’s world… and keep improving results year over year.