By Michael Weening
I frequently get asked the question, “How do you drive forecast accuracy?” and have debated it with many fellow sales leaders.
The answer is very simple. Forecast accuracy isn’t a goal, but an outcome.
Your goal shouldn’t be accuracy – it should be consistency. Here’s why. A sales organization that has a forecast with a 75 percent accuracy rating in the first quarter, 45 percent accuracy in the second quarter, and 99 percent accuracy in the third quarter is obviously highly inconsistent. Who knows where the arrow will hit?
However, if a sales organization maintains a steady 65 percent forecast accuracy for three straight quarters, the sales operations team can build those propensities into the forecast model.
For a forecast to truly be useful, the sales leader must focus on consistency. 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.
Six Steps to Drive Forecast Consistency
Step #1: Create a well-defined sales model with all elements of the sales cycle mapped into your CRM tool. If you use Salesforce.com, that means 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.
Step #2: The training programs reinforce the sales model and ensure everyone understands how to use the CRM tool. This is not once and done; it needs to be ongoing and constantly reinforced.
Step #3: Abandon all Excel-based 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 uses 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.
Step #4: Make sure the sales operations team includes analysts who live outside the field forecasting process. Also ensure they understand how to build propensity models to drive accurate forecasts.
Step #5: Don’t forecast too frequently. Nothing is worse for your salespeople than asking them to step away from their customers and prospects to explain their opportunity for the third time in two weeks.
Step #6: Consider any alterations you might need to make to your sales compensation structure. This is a much larger discussion, but I have frequently implemented a percentage of variable income (e.g., five percent) 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 in my recent post, “What Gets Paid Gets Done.”
A version of this post was published originally on Michael Weening’s blog. Michael Weening is a senior vice president at Salesforce.com, has been a presenter at past Sales 2.0 Conferences, and is in the process of completing the book Leading a Sales Transformation.