I frequently get asked the question “How do you drive forecast accuracy?” and have debated it with many fellow sales leaders.
Forecast accuracy is not a goal. It is an outcome. The goal is consistency.
If a sales organization is 75% accurate in Q1, 45% accurate in Q2 and 99% accurate in Q3, it is impossible to forecast accurately as there is no consistency. Who knows where the arrow will hit?
However, if a sales organization is 65% accurate in Q1, Q2 and Q3, then the sales operations team can build those propensities into the forecast model. They key is the sales leader focusing on forecast consistency. The operations team will move the numbers to an accurate point and produce a quality forecast. If you do not have a sales operations team to play that role? As the sales leader, you can make that call. If the team forecasts a consistent way each time, you will know how to adjust the numbers to hit the center.
How do you drive consistency?
- A well-defined sales model with all elements of the sales cycle mapped into your CRM tool. If you use Salesforce.com, that means that the sales model has been mapped into opportunities, and every stage is well defined. A sales rep knows when to move a deal from Stage 1 to Stage 2, and they all do it the same way.
- The training programs reinforce the sales model and ensure that everyone understands how to use the CRM tool. This is not once and done; it needs to be ongoing and constantly reinforced.
- Sales leadership abandons all Excel forecasts. Leading from the front, they use dashboards and the CRM forecasting engine to drive all forecasting calls. In the Salesforce.com model, sales leadership drives all forecasts from the engine and use data insights such as deal velocity – how fast deals move from one stage to the next – to coach. If a deal jumps from prospect to closed, skipping all the steps in between, there is a problem.
- The sales operations team includes analysts who live outside the field forecasting process and understand how to build propensity models to drive accurate forecasts.
- Sales leadership does not forecast too frequently. Nothing is worse than making the field divert effort from their customers to explain their opportunity for the 3rd time in 2 weeks.
- Consider compensation structure. This is a much larger discussion, but I have frequently implemented a percentage of variable income (e.g. 5%) to internal hygiene tasks. For example, setting the target of ensuring all contacts have an address and email for one-quarter, and forecast consistency targets the next. Read more here.
Consistency leads to accuracy.