5 Mistakes Manager Make When Forecasting Sales
#1: Failing to enforce data precision: Accurate forecasting starts with accurate information. And while your CRM can (and should) provide you with every report you need, it’s the data entry that matters. It must be absolutely black and white—which means you cannot accept excuses from your team when data is missing or inaccurate. Information such as staging, close date, next steps and value of the deal must be exact and up-to-date—and your sales process should have no room for ambiguity. This means that a Stage 3 deal is the same for every sales person based upon solid exit criteria. Your reps can’t mark it at Stage 2 because they don’t want the visibility. As NFL coach Bill Belichick famously quips, “It is what it is.”
#2: Managing to 90 days: Far too many sales managers and reps manage pipelines to quarter-end. This is insane. And a sure recipe for failure. Sales leaders must be vigilant in looking at least 2 quarters down the road. For example, if you see you are having a great quarter and based on optics, the next one looks bad, you need to manage that now—because by the end of the quarter, it’s too late. Getting ahead of the problem now allows you the option of pushing some deals forward, enlisting more BDR support or hitting up marketing to push out additional incentives. But this takes planning and you simply can’t do that with a 90-day perspective.
#3: Missing the bigger picture: Managers tend to focus one of two things:
- All of the deals on the table (the old “Super Salesperson” approach)
- The total number of dollars (the old “Big Payoff” approach)
Unfortunately, focusing on just one of these sales elements is short-sighted. You have to look at both in a holistic way. Whether your team has four deals in the pipeline or 4,000, it’s critical that you investigate and interrogate every week and know all the deals by heart. But you can’t ignore the total dollars on the table, the flow of all the deals, your sales cycles and how contracts could trickle in based upon a historical perspective. Only when you absorb the full picture can you be deadly accurate in calling your numbers.
#4: Using one method of forecasting: I am a full believer in using multiple methods to build out numbers. In addition to the methods noted above, there are three things you should incorporate into forecasting:
- Your people. Evaluate the trending data on how accurately your team predicts their number. Some will always be over, some under and some dead on. So listening to their input on the likelihood of deals closing can be an indicator. But because reps are typically either overly optimistic or overly pessimistic, you can’t accept their input at face value. Put on your FBI detective hat, and unemotionally and analytically extract the data you need.
- Your gut. As a sales leader, trust that your gut can provide valuable insight. Review the team’s deals for ones you personally believe in and total those up to identify the gaps.
- Historical trends. While trends are not always indicative of the future, they shouldn’t be totally dismissed. Consider including a weighted pipeline view to add another layer of visibility.
#5: Focusing on the Big Whale: At the end of quarter, without fail, everyone comes out of the woodwork to focus on and champion a couple of large, high-stage deals that are expected to close. Sure, the revenue is impressive, but how much value does it offer to surround a deal that you know is going to close vs. nurturing others that are on the fence? In addition, don’t make the mistake of honing in on only the closing of higher stage deals and forget to analyze what it takes to get to that point. Look at the whole picture, including pre-pipeline activity (aka leading indicators, which you can learn more about in this article), mid-sales process, and end stages. Much can be learned from those stages and a thorough analysis of the metrics will help you better understand and predict future outcomes.
You aren’t alone
If you’ve made (or are making) one of the above mistakes, fear not—you are in good company. There are many talented sales leaders who fail to do the necessary things to mitigate the risk in their sales forecasting but that doesn’t mean it can’t be done. Being a good forecaster requires you to keep your beliefs from clouding your perceptions. But, when you combine those beliefs with accurate data, you can improve forecast accuracy substantially. I have always held myself to the standard of being right on target, however getting within 5% – 10%, depending on your number, is respectable and the larger the number, the easier it is to actually do.