What You Can Learn From an Inaccurate Sales Forecast
I've been blessed with the opportunity of working with hundreds of sales and recruiting teams from IT staffing companies across the country. One of the most common questions I get is "Dan, how does our sales team stack up against the competition?" As you can imagine, there are many ways in which I can answer this question and even more ways in which to compare and contrast one sales team to another. So a few years ago I started answering this question with the following question, "how accurate was your most recent sales forecast?" I usually get a deer in the headlights kind of response.
A sales forecast tells you just about everything you need to know about a sales organization. Your sales forecast is a reading of your vital signs, telling the sales leader and CEO how healthy or unhealthy the sales organization is. However, when asked to pull together their sales forecast most sales managers rely exclusively on past experience and gut instinct. Many more lack a defined process and therefore can't explain how they arrived at the numbers in their sales forecast or explain why they think their sales forecast accuracy will improve from the prior month.
What Inaccurate Sales Forecast Says About Your Sales Organization
At a minimum, an inaccurate (or inability) sales forecast demonstrates your sales team likely has:
- Poor time management skills, often chasing the wrong customers and wrong opportunities
- Room for improvement with qualifying
- A sales process that is not aligned with the buyer journey
- A sales leader who is in over his or her head
In this blog post I'm going to share with you three tips for creating an accurate sales forecast.
Understanding Buyer Behavior, How Your Customers Buy
Accurate sales forecasting starts with having a sound understanding of customer behavior. You will never, ever have an accurate sales forecast until you first understand buyer behavior and how your customers buy. The most common mistake I see IT staffing sales managers make with their sales forecasting is they simply list out all of the tasks and activities they have completed. They think to themselves, “I better tell my reps to do more activity because more activity will lead to more closed deals." Wrong! The problem with this thinking and logic is it fails to take the buyer into consideration. It fails to account for the steps the buyer has completed in their purchasing process, what steps still need to be completed what the buyer is willing to do. One piece of advice that I received from a mentor is salespeople don’t earn a commission for the things they do or complete, they earn a commission based on the steps your customer completes. Your sales process will only move forward when the customer commits to taking action. You can submit all the candidates in the world but it won't do a damn thing if you can’t compel your customer to review their resumes and interviews those candidates. It is incumbent on the sales organization to get crystal clear on how your customer will buy from you including their interview, hiring and decision making process. What is the process they will use? What milestones in the purchasing process still lie ahead and need to be approved?
Customer Driven, Milestone based Pipeline
I suspect at some point during your sales career you have heard the following terms in one form or another:
- "Early stage" opportunity
- "Late stage"opportunity
- "Top of the funnel"
- "Bottom" of the funnel"
- "Middle of the funnel"
What these sales funnel metaphors are referring to is where your customer is at in their process for buying your service or hiring your consultant. It has nothing to do with where you are at with sourcing, screening or submitting candidates. The customer is the focal point. The key to being accurate here is for your process to be grounded in the reality of how your customer buys and that really means understanding their buying behavior. Is a send-out or client submittal a key milestone that the client commits to in the sales process? If so, include it in yours sales process and make it a milestone. Whatever sales funnel milestones you chose, make sure they are embedded into your sales process including your CRM so that they can serve as sign posts or mile markers telling your salespeople exactly where they stand with their customer within the sales process. Where you stand in sales process is predicated and driven by the customer. This is the key to sales forecasting accuracy.
A Sales Forecast is Only a Moment in Time
Keep in mind that a sales forecast is simply a snapshot of a moment of time. Your customer's priorities including their purchasing process is constantly evolving and changing. For these reasons your sales forecasting including the stages of your sales funnel and your sales forecast must change and evolve with it. You may notice that your buyers change the way they purchase your service in which case you may need to add an additional milestone to your sales process. Or you may discover that the values you placed on each stage of your sales funnel (milestones) need to be revised because you have more predictive data about sales win rates. For example, I recently I updated my sales process. I actually have three different sales processes that I follow. I have a sales process, one each for how my buyers go about hiring me to help them with a sales transformation project, another for purchasing sales training LMS licenses or our recruiting training LMS licenses and LMS training contract renewals. Why three processes? Because the customer's purchasing process is different for all three of those offerings so I have to align my sales process to support my customers and how they buy.
Hopefully after reading this post you now recognize and understand why I ask ask customers "how accurate was your last sales forecast?" You can't have an accurate sales forecast without executing the sales fundamentals, so the answer to the question really does reveal the sales organizations level of effectiveness. Having an accurate sales forecast really requires a sales organization to track and measure the right sales metrics and follow a sound sales process that is aligned with how customers buy. What methods are you applying to develop your sales forecast? How accurate is your sales forecast? Let's start a conversation in the comments section below.
About Dan Fisher
Dan Fisher is founder and owner of Menemsha Group, a provider of sales enablement solutions dedicated to helping IT staffing firms improve win rates, shorten their sales cycle, and increase revenue per sales rep. Since launching Menemsha Group in 2008, Dan has consulted with over 200 IT staffing firms and has invested over 5000 hours coaching IT staffing sales reps. He’s authored is his own proprietary sales methodology and has previously spoken at Staffing World, TechServe Alliance and Bullhorn Live 2012. Prior to launching Menemsha Group, Dan spent 16 years in the IT industry running local, regional and national sales teams. Dan worked for Kelly Services, Oracle Corporation and Alliance Consulting. Dan currently resides in Boston, Ma.