Five tips to boost the accuracy of your sales forecasts

Sales managers are continually trying to extract more revenue from sales executives – such tactics, however, can be counterproductive.

SQDM shares an article published by the TechTarget portal that provides a fresh perspective on that great favorite of IT sales – the forecast.

Some people may characterize the process of forecasting sales 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 knowing that those goals are often unattainable.  As a result, executives and managers can spend hours making contortions to project a bright revenue future, based on a sales pipeline that is only 25% accurate.

“The forecast part is the funniest 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 new business closing is 75%.  As a result, 41% of those involved say that CRM does not provide quality data for sales forecasting.

That may be part of why sales results may be poor as well.  According to Forbes, in 2013 only 58 percent of business executives achieved their quota.  A poor or inaccurate methodology also has an impact on forecasting.  According to the Sales Management Association, 74% of sales leaders believe their company’s forecasts are only partially accurate or, at worst, totally inaccurate.

“It’s a comedy, but the reality is that 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

Commercial executives do not have to reinvent the wheel.  Best practices exist to avoid the deadly embrace of promising many businesses and closing few.  Jason Jordan outlines the following principles to improve the accuracy of a sales forecast.

  1. Empower your account executives with technology. Use tools like CRM and others to make an accurate forecast.  If you don’t have a spreadsheet or other analytical capabilities, there are other options.
  1. Training. Only 28% of companies say they train their sales executives.  If you don’t take the time to define an opportunity and train your sales force in the use of technology, then, in a way, you are getting what you deserve.
  1. Hold the sales force accountable for the forecast. Having to respond 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 taking out the trash from the house, but holding the sales force accountable can increase effectiveness.
  1. 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 have no 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 sure of the closure – I would feel better.
  1. Have a properly defined sales cycle. Many companies lack clearly defined terms for making a forecast.  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, to having the ability to intervene and train your sales force if you are losing your sales prospects at a certain stage of the cycle,” says Jordan.  “You need the confidence that when you spot problems, it’s because there really are problems.

Part of the current drawback 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.  If sales executives focus on supporting or embracing their customers’ buying cycle, then they can be more successful.

The key is to recognize that a sales cycle must emulate the customer’s purchase cycle/process.

Read the full article, here.

For years, SQDM -Software Quality Driven Management- has advised a number of companies with professional consulting services on IT strategies.  SQDM is an official business partner of leading manufacturers in the industry including Salesforce, Microsoft, Oracle, AuraPortal and Tibco.

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