“Ok, Don, you have $350k forecasted for this quarter with Citbank, where are we in the process?”
It was our weekly forecast call and Don had been batting a big fat zero for weeks. Naturally, he blamed his territory. We responded by sharing with him that having New York City by himself was a sweet gig and he needed to start taking advantage of the opportunity or move on.
So like magic, Don’s forecast goes from $0 to $500,000 in one week. Half million, just like that.
“Ok Don, who are you talking to and whats the process?”
“Well, I met this girl who works for the VP of IT. She’s going to arrange a dinner with me and her boss. I figure we’ll have a good meal, share a few drinks, and schedule a webex. I will show the VP a quick overview, and we should wrap this up by the end of the month.”
“The end of the month is in two weeks.”
“Right.”
“So you are telling me that a VP at a premier financial services company is going to spend $350,000 with a vendor based on one dinner and an online meeting?”
“That’s the plan.”
“And there are no formal requirements, no RFP, no evaluation team, and no evaluation process?”
“That’s why I can get it in so quickly.”
“Don, one of us on this call is stark raving stupid and fortunately its not me this time.”
Keys to Effective Forecasting
Weekly Forecast Reveiw
When digging a ditch, its almost impossible to tell if you are progressing in a straight line. Thats why its important to have someone on higher ground monitoring your progress and giving direction.
In an enterprise sales environment, even the best can overlook the fundamentals. The sales manager is responsible for identifying missing fundamentals and red flags that will delay or derail your deals.
Early in my sales career, I used to take any critique as a personal insult against my sales skills. If you are the sales manager you need to be aware of the fragility of the alpha-male ego, and treat accordingly.
Who makes it to your forecast, who doesn’t?
Your forecast is the justification for your existence, treat with care.
If there is an account that is repeatedly taken up your time, they belong on your forecast. If there is no good reason to put them on your forecast, stop wasting time on them. You can go broke being a free source of information.
The Evergreen Deals
I know the person that took my position with a former employer. There are three companies that were on my forecast 3 years ago, that still live on today.
If there are deals in your forecast that you know will never close, call your boss, explain the facts and then remove them. You will win far more brownie points than never closing a forecast of fictitious deals.
The Fundamentals
Here are the questions that a sales manager need to ask about every deal.
Who - Who will run evaluation, Who will fund with budget, Who will make the decision, Who will sign off?
What - What products and services are you pitching?
Why - Why are they looking? Why are they looking at us?
When - (Work Backwards) When do they want to be live? When do they want training? When do they want to make a vendor selection? When will they have their short list? When will they invite vendors for first round evaluations?
The “Gut” Explained
Ok so what percentage do you put on your deals? Try this:
25% – You are in the deal
50% – You are on the short list of three or less vendors
75% – You are selected, waiting for final executive sign off
90% – Paperwork complete, waiting on purchase order
100% – Paperwork received and processed by accounting
Any suggestion? Email us at sales.wars@gmail.com
7 responses so far ↓
trish bertuzzi // April 21, 2008 at 10:35 am |
There is a quick and easy solution to forecasting woes that we recommend to our clients and that gets great results. Compensation drives behavior right…so tie a bonus or MBO to your sales reps being +/- 10% of their quarterly forecast. They can’t sandbag because they can only be over by 10% and they can’t fluff up the forecast because they can’t be under by more than 10%. You will be amazed at how much more accurate they will be once you tie an incentive to it!
Craig Klein // April 22, 2008 at 8:12 pm |
Man how many times have I had that meeting!
Great tips on keeping it clean!
Vern // April 30, 2008 at 10:06 am |
Good stuff, but here’s my question. Forecasting is partly about predicting where you currently are or WILL end up, but isn’t it even more important to assess where you SHOULD invest your limited time and sales resources based on what you currently know about a deal? Any tips for doing that kind of projection?
For example, “over the last 12 months, all the deals that had these four attributes closed at a 90% rate, therefore, this deal is going to be assigned a 90% chance of closing – even though I haven’t even got to a short list yet.” And then, “today we found out that regardless of what they said, their executives indicated they really care about … so I am reducing/increasing the % accordingly.”
So it’s not whether you are shortlisted yet, but predicting that you’re GOING to be shortlisted. No one expects this to be a hard science, but then again, all we’re asking for are percentages. I suspect the real reluctance here is that not enough sales data is kept about past deals to say with any certainty why any of them really did or did not close.
In other words, aren’t you saying the deal closed because you got selected?
kdsasser // April 30, 2008 at 9:03 pm |
Great comment and questions Vern.
IMHO, this would make a great question for linkedin.
The most frustrating part of forecasting is that you never have 100% clarity on your deals. While you can track environmental data, its almost impossible to capture cultural or even emotional data. Even in the deals where you should win, invisible things like “project manager doesn’t like the rep”, “executive only buys from bigger vendors”, or “competitor has sky box at Yankee’s stadium for clients”, will move a win into the lost column. This is why you can’t be premature in moving a deal to the top of the forecast based purely on criteria and facts. In the end, people buy from people, and we are extremely emotional creatures.
On your point, yes a forecast should aid in predicting where you will wind up deal-wise, and with management overview, determine the allocating of resources to those deals with the higher probabilities of closing.
The accuracy of this exercise is largely dictated by the skill and instinct of the sales reps and the level of effective communications within the sales team, so the most important elements needed for accurate forecasting are mutual trust and respect among the sales reps and their manager.
If the rep feels that he/she can win a deal, they are going to “sell” it to management to get the resources to try to win.
However if the rep is behind on quota and desperate, they will sell false hope to management. Sadly, its been my experience that a rep’s life was better when he gave management false hope and wasted resources on lost deals, than when he owned up to an empty pipeline. “Tough loss Sasser, get em next time” vs. “What the hell have you been doing all day?”
Take a look at how bad news is communicated internally. Is there a “shoot the messenger” mentality? If there is, your reps will only tell what management wants to hear, not what they need to hear.
The other side of this issue is how well is management listening? An SVP once addressed our team with “We will do anything to get deals…”, when we responded with “great, we need one more inside sales resource”, he finished his sentence with “….as long as it doesn’t require time, money, or resources”. I Love SVP’s.
You can try to get your reps more personally involved in the forecasting process. In most sales teams the manager takes deal info from the reps, but rarely do they share and teach the reps how management needs to interact and understand the forecast. I learned “the big picture” for the first time when I had to cover for my vacationing boss and run the pipeline review. I finally understood how the forecast was treated from my boss to the President of the company. From that point forward, I put far more thought into my forecasts, and was open to more scrutiny on my deals.
Within reason, give your reps the approval to walk away from deals. When the message from the top is “We got to blow out our number this quarter”, as a rep that puts a lot of pressure on your to chase every rabbit down every hole.
While many develop the “win” criteria, try adding the “walk away” criteria. If a prospect meets a select set of detrimental criteria, then the rep can gracefully remove themselves from the deal. This is also a great tool for a manager to judge the level of passion a rep has in winning a deal.
On the point of collecting criteria of your client base to determine those organizations most likely to do business with you, the challenge is that the sales rep is going to track just enough to get the deal, but no more. Your support team may collect the other criteria, odds are, in a system not shared with sales. The reason more data is not collected and analyzed is that usually no one “owns” the responsibility of collecting and managing the data.
To your final point, yes the deal closed as a result of being selected, but being selected does not close the deal.
Thank you again.
trish bertuzzi // May 1, 2008 at 7:25 am |
@ Vern. Great response and you are right on. You are correct in that the challenge is that most companies don’t know where to invest their time and effort because they haven’t done any real analysis of their wins or losses.
Sure, they may have done some loss analysis on a few major accounts but did they really ask the hard questions about how did we did in the areas of people, process, product and pricing?
Probably not and that is the data you need to not only forecast more accurately but also to make the changes that will increase your close rate. We have a client, ATG, who made that investment…check out the case study here.
http://www.bridgegroupinc.com/win_loss_analysis_atg.html
Michael Kreppein // May 2, 2008 at 1:17 pm |
Kevin,
A great posting as evidenced by the number of thoughtful replies. I think you could write a book on the subject of forecasting. Title it, “Reaching for Sales Management’s Holy Grail!” Certainly many a CRM sales rep made their own number on the promise of improving sales forecasting for the management team.
Instead of suggesting some answers, let me add some fuel to the fire.
My first issue with using percentages to delineate sales steps is when management converts the likelihood of a deal closing with how much revenue to forecast. So if if a rep has a deal for $100K that’s short-listed and another one for $200K that’s waiting for the PO then the sales manager tells the CEO that the rep’s good for $230K ($100*.5 + $200*.9). But that’s inaccurate – the rep’s either going to close $0, $100K, $200K or $300K. But not $230K. Using percentages can approximate a forecast at a macro level but is deadly at the rep level. Yet CRM tools push forecasting percentages to the rep level.
Your post focuses on the stages of a sales cycle and what percentage to assign each stage. My second issue is what’s not considered here and that’s the TIMING of the deal. Nothing gets management more upset than to see a deal at 90% for months, especially if the delay spans a quarter. Vendor purchasing agents are masters of negotiation. Since they’re often deaf to their own employee’s plea to get a deal done now for internal reasons, it makes the sales rep’s job of forecasting WHEN especially challenging. Customers, especially big ones, don’t care when your quarter closes but they are acutely willing to take advantage of your end-of-quarter desperation.
brownie try its requirements // May 10, 2008 at 3:00 pm |
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