Friday, October 21, 2011

Sales Process Breakdowns: Are Your Forecasts Really Just Guesswork?


Think for a second about the least reliable things in the world. What comes to mind? It could be a cheap used car. Or maybe your United Airlines flight itinerary. Or how about a clunker computer with an operating system older than Justin Bieber?
You can’t really count on any of them.

Of course, if you’re an expansion stage founder or executive, something else might come to mind. Like, for instance, sales forecasts.

Did you hear that collective sigh? For a lot of early stage companies, forecasting is a futile practice dragged down by faulty or incomplete data.

It’s not hard to figure out why, either. Most salespeople are taught the cliche — and incorrect — approach of under-promising and over-delivering. They sandbag forecasts, fudge numbers, and underestimate their potential to protect themselves. If they underperform, they’ll still hit their forecast. If they perform as they should, they’ll look like a sales superstar.

The obvious problem with this philosophy is that it prevents a company’s management team from making decisions based in fact. And guesswork forecasting is a quick way to start a tsunami that will tear through every other component of your sales process.

Faulty forecasts are really the result of companies poorly defining their process of milestones. There’s a knowledge transfer that needs to take place at every step in the sales process that keeps everyone in the loop and allows them to understand — not guess — what to expect next.

So how can you shore up that knowledge transfer?

It starts with truly defining what a forecasted opportunity means. If a salesperson can’t say who a decision maker is, what they talked to that person about, why they talked about those things, and how that data will affect the projected close date, then their forecasts will be horrible.

It’s also critical to place opportunities in the right grouping. If they’re likely to close in the next 90 days, they should appear in a forecast. Anything outside of that is an opportunity that will lead to a more fruitful pipeline — and ultimately a better future forecast.

Forecasts should be updated in real-time based on every interaction with a prospect. That way, sales managers and their salespeople can comfortably say what the definitive next step is and make decisions based on that data. Great forecasts — not sandbagged ones — will result from that.

Former Oracle global account manager Eric Berridge (now the co-founder and principal of management consultancy Bluewolf), makes a good point when he writes in a guest post for SellingPower that stronger forecasts also result from well-structured weekly sales calls. He suggests incorporating these tactics into those calls to improve forecasting:
  • Only speak about deals that are forecasted at 50% or greater. Forecast calls are for closers, not dreamers.
  • Let the numbers speak for themselves. Forecasting is about accurate, concrete data. As such, forecast calls aren’t the time for scolding or reflection.
  • Invite marketing to join the call. Poor forecasting is a common breakdown, but it’s not an isolated problem. It often points toward a weak sales process, which includes everyone involved in opportunity creation. In a small expansion stage company, there aren’t many team members left out of that equation.
There are several more factors that contribute to good — and bad — forecasts than the ones I’ve listed here, and you can find numerous sources that will help you address each individual issue.

 But as I wrote in a previous post, simply addressing the symptoms of a terminal illness won’t do much to cure you of it. You have to focus on the root cause and treat it. For most expansion stage businesses, that means you have to take a deeper look at your sales process. If your forecasts stink, I’m willing to bet there are much bigger problems festering somewhere else.