Comms Business Awards judge Nick Wright asks ‘Why is Sales Forecasting such a problem?’ and provides a few answers on how to get it right.
In most Sales organisations we ask our sales team to forecast their sales pipeline. Whether it be weekly, monthly or quarterly, it is invariably a wish list, often divorced from reality. This is really common across all business spheres no matter how large the organisation, and no different whether it’s new business or account development.
This poses a serious problem to management and planning/provisioning. Why?
- It’s usually down to one or more reasons-
- Sales people tell you what you want to hear to keep Management ‘off their back’.
- A lack of understanding of the difference between a ‘suspect’ and a ‘prospect’
- No genuine empathy or understanding of the clients true needs/desires
- No structured methodology to ‘measure’ a prospect
- They don’t want to be embarrassed in front of their peer-group….and a myriad of other reasons.
- The team doesn’t understand the impact poor pipeline expectation has on the business
What’s the solution?
There is no single silver-bullet, but here are a few ideas you may try.
Utilise a measurement for the key indicators; SCOTSMAN and POSTMAN are known methods. A simple approach may be:
- Is there a compelling event/timeline? Yes or No? If yes you have a 20% chance of business.
- Have they demonstrated they have the means to finance? Y/N, Y=15% (I could talk for hours as to why you and they should use third party financing rather than cash – there are benefits on both sides).
- Are you dealing with the decision maker, key influencer, or an information gatherer? (They’d like to be in the first two categories, and often pretend they are!) Y=15%/10%/0%
- Do you REALLY know their decision process? Price? Product? Person? By the way, when they say it’s not based on price, they’re pulling your leg! Everything has a value/cost ratio! Y=15%
- Is your solution genuinely suitable (sometimes referred to as a ‘me too’ product) or unique/innovative? 5% or 15%
- Existing customer? Y = 20% or new business, 0%? If a referral then 10%
The total can come to more than 100% if you choose, as it is extremely rare that any prospect will meet the top end of all criteria.
You get the gist. The point is, if you cannot score more than 50% you’re just having a nice chat! 50-75% is a suspect. It must be more than 75% to make it onto the prospect list, and at least 85% to make it onto this months list.
I also don’t believe employing a very expensive software solution is the panacea it is sometimes made out to be. What it proves is that your team can comply with process driven tasks, (the bean-counters love it) and believe me, if there’s a way to fudge the system, salespeople are the best at finding a way.
That said, measuring activity from cradle to grave should provide natural sales indicators (in the old days we called these activity ratios – how many contacts to appointments? How many appointments to proposals/second meetings? Value of overall proposals to business generated?)
Before I go on, why ask for prospects at all? After all, no one employs a salesperson because their CV said ‘I was the number one in the company for my prospect pipeline accuracy’…PS. I never hit target!
There are legitimate reasons for requiring a pipeline, particularly in smaller companies. One such being resource allocation another being cash flow.
Have you explained this to your team? Do they understand and buy-in to the need for it?
Here’s a thought…next time a salesperson gives you yet another inaccurate forecast, tell them you’ll pay them the same percentage of their salary as the accuracy of next months forecast. I.e. 80% of forecast actually achieved, 80% salary/commission paid (up to 100%). That’ll make them twitchy!
As a manager you should consider the merits of prospect gathering, whether in meetings or via IT. Is it really helping your business planning and sales performance, or just creating additional work and consuming your most valuable resource…time?
If it doesn’t make any difference, why bother?
If you do require business pipelines, make sure the need is clearly understood, the measurements are simple, transparent. It is extremely important that they’re consistent. This will provide you with a long-term litmus test for existing people and new recruits.
Have different criteria for new business vs. account management. Existing customers could be refined further for example, new product lines in to existing vs. upgrade or renewals.
It’s the ‘magic’ matrix – how to keep customers sticky.