Improving sales forecasting accuracy is vitally important for sales managers, salespeople, and their executive team. Getting an accurate estimation on what solutions you’re going to close, the size of the opportunity, when you’re going to bring it to closure, and the likelihood of bringing it to closure affects everything from resource allocation and hiring to public reporting. But how do you improve the accuracy of your sales forecasts?
Here are five tips to improve sales forecasting accuracy.
1. Have Standard Qualification Criteria
The sales team should have standardized criteria for qualification.
Too often, qualification is left to individual sales reps to decide what they think is going to happen based on what their gut tells them. I appreciate this gut feeling because I’ve certainly relied on it in my career. But a gut feeling shouldn’t be based on good vibes; it should be based on the answers to some specific questions, such as customers’ motives to reach their desired outcome or derive a certain business value within a specific time frame.
What’s their urgency to get there? What sort of payback or return do they expect? What’s the priority of this project versus several others they have under consideration? What are the consequences if they don’t move forward with this project? You can have your own set of criteria, any number of questions, but have a set of questions that you use consistently.
Aside from having standard qualification criteria, you can also improve your sales forecasting accuracy by using sales forecast templates. If you feel in the dark forecasting your sales, using a sales forecast template can help you forecast with accuracy in order to identify gaps and vulnerabilities in your sales pipeline. By doing so, you can ensure that your sales team can hit the required number of sales in a given period.
2. Qualify with MoreThan Just One Person
Too many times, we meet someone in an account and we like them, they like us, we get excited about working with them and we run out to the car after the meeting to tell the boss that the guy really wants to move forward. But if we haven’t met that guy’s boss, his boss’s boss or, in some cases, several different people who have to provide final approval, we really don’t have a good picture of what the overall organization thinks of moving forward within a specific time frame. We have to be careful not to take any one person’s word for it; we have to qualify with multiple people.
Working and talking with several people can help you become more adaptable, divergent, and flexible. For instance, you should seek the feedback of the management, a business coach, your employees, and even your customers who patronize your products. Having various sources of information on how to improve your sales forecasting accuracy. It can help you in targeting the right audience and creating the right sales and marketing strategies.
3. Fully Understand Their Buying Process
Too often, when people tell us they’re ready to move forward and that they’re going to go to their boss for approval, we thank them and ask them to call us when they’re ready to place the order. We don’t even ask what happens next. For example, does it have to go to finance for approval? And if so, what criteria does the finance team use to approve it? What kind of ROI or business case do you have to present to them to get approval on a project like this? If finance approves, where does it go after that?
We should aim to understand every step of the buying process and meet as many people involved in the process as possible so we can qualify them. One of the biggest reasons that opportunities slip from one month to the next is that we haven’t gained an understanding of the buying process and the steps the customer has to take.
It’s crucial to understand your customers by creating parameters of an ideal customer or buyer persona. In this way, you can create better approaches based on each persona that relates to your product or service offering. Hence, you need to brainstorm your team and come up with strategies to create your buyer personas. Of course, don’t miss out on talking with your customers too via survey or interview. Your customers are the best people who can help you build your buyer personas.
4. Overcome “Happy Ears”
I heard this term in one of our sales training workshops 20 years ago. “Happy ears” is the idea that we don’t hear any bad news; we hear only the good news. It’s an affliction that many of us in sales suffer from, and we need to work on it and overcome it. In reality, we want to look for the bad news.
As some people say, “bad news early is good news.” We want to find out what can go wrong, figure out the obstacles to move forward, the hurdles to jump over and the landmines we need to avoid along the way so we can make sure an opportunity flows through our pipeline, through their approval process and through to closure at the time we expect.
Smaller opportunities in the pipeline may not warrant this type of attention, but on every deal that’s big enough, take the time to troubleshoot. Ask yourself, “what could go wrong?” Who could stop this deal from happening? What new information could they gather that could cause them to not move forward?”
Figure out the things that could break an opportunity down and learn to ask the questions about what happens when a project goes to finance. Learn to help your client troubleshoot and think about what could go wrong. This isn’t about being pessimistic; it’s about minimizing the risks for failure. We want to ask ourselves more of the tough questions and figure out where an opportunity might break down so we can take corrective action before the opportunity slips or falls through altogether.
I hope you find these tips for increasing forecasting accuracy helpful. What other measures do you take to ensure forecasting accuracy?