Sales managers are continually trying to extract more revenue from sales executives-such tactics, however, can backfire.
SQDM shares an article published by the TechTarget portal that provides a fresh perspective on that great IT sales favorite-the forecast.
Some people may characterize the process of making a sales forecast as a useful exercise.
We assume that sales forecasts use historical data to project future reality, but the truth is that some account executives end up exaggerating numbers to please their managers, even though they know that those goals are often unattainable. As a result, executives and managers can spend hours doing contortions to project a bright revenue future based on a sales pipeline that is only 25% accurate.
“The forecast part is the most comical thing in the sales force,” says Jason Jordan of Vantage Point Performance Inc. “We have historical information, but we refuse to use it, even when someone closed 25% of their business last year and claims that the probability of closing new business is 75%.” As a result, 41% of those involved say CRM does not provide quality data for forecasting sales.
That may be part of why sales results can be poor as well. According to Forbes, in 2013 only 58% of sales executives achieved their quota. Poor or inaccurate methodology also plays a role in forecasting. According to the Sales Management Association, 74% of sales leaders believe their companies’ forecasts are only partially accurate or, at worst, completely inaccurate.
“It’s a comedy, but the reality is we have to do it,” says Jordan. The key, then, is to help improve the accuracy of sales forecasts-and to help managers trust that information.
Tips to boost the accuracy of your sales forecast
Business executives don’t have to reinvent the wheel. There are best practices to avoid the deadly embrace of promising too much business and closing too little. Jason Jordan outlines the following principles to improve the accuracy of a sales forecast.
- Empower your account executives with technology. Use tools such as CRM and others for accurate forecasting. If you don’t have a spreadsheet or other analytical capabilities, there are other options.
- Training. Only 28% of companies report training their sales executives. If you don’t take the time to define an opportunity and train your sales force on leveraging and using technology, then, in a way, you’re getting what you deserve.
- Hold the sales force accountable for the forecast. That accountability increases forecast accuracy by 26%, says Jordan. The accuracy and precision of that information is part of the sales force compensation plan in some companies. Forecasting is certainly an administrative burden, like having to take the garbage out of the house, but holding the sales force accountable can increase effectiveness.
- Pipeline management. According to the Sales Management Association, only 44% say they manage their pipeline correctly and 43% say they are not adept at doing so. As a result, sales managers lack confidence in the results they discuss with their account executives. “I would sleep better knowing that my sales force is working on pipelines I would like to have confidence that when the sales team records something in their “Committed” business it is because they are really confident about the close – I would feel better.”
- Have a properly defined sales cycle. Many companies lack clearly defined terms for forecasting. Only 42% of companies seem to have a clear methodology in this regard.
“You must define stages in the process, and how you define those stages will be critical to having visibility into each part and, more importantly, having the ability to intervene and train your sales force if they are losing their sales prospects at a certain stage in the cycle,” Jordan says. “You need the confidence that when you detect problems, it’s because there really are problems.”
Part of the current drawbacks of sales management is that managers are so caught up in tracking and monitoring their sales executives that they tend to forget about the customer already. If sales executives focus on supporting or embracing the buying cycle of their customers, then they can become more successful.
The key is to recognize that a sales cycle must emulate the customer’s buying cycle/process.
Read the full article here.
For years, SQDM -Software Quality Driven Management- has provided countless companies with professional consulting services on IT strategies. SQDM is an official business partner of industry-leading vendors including Salesforce, Microsoft, Oracle, AuraPortal and Tibco.