Ed. We’re bringing back one of the most original excuses for a bad forecast ever, and some discussion of the difficulties sales managers have with normalizing the forecasts of their whole team so they get an accurate overall forecast.
The most original excuse I’ve ever heard for an inaccurate forecast: the hooker wrecked it. It’s absolutely true. First-person true. It was actually my excuse.
I had a deal done with a state government, ready to spike the ball. Then the Governor got caught with a prostitute and had to resign. The Lieutenant Governor, in an act of fiscal bravado, froze all state spending until he could review the state’s finances. Thus, the purchase order that had been approved and was ready for release was history, along with about 40% of that period’s sales.
That was a legitimate reason and it falls into the forecasting category of a massive and unpredictable event. The only other reason for bad forecasts is bad methodology.
For the sales manager, good forecasts rely on two factors – accuracy and consistency. He has to apply these two fundamentals across a herd of different personalities, motivations, expectations, capabilities, knowledge, experience, etc.
Accuracy and consistency are the vertical and horizontal axes of the sales graph. Accuracy is the individual sales person. He must know his opportunities, their value, and their close date. And he must record these diligently and honestly, updating them as the sales cycle evolves. Consistency is the sales team. They must all do the same thing using the same criteria. Joe’s 60% probability must be the same as Martha’s.
What is your forecast that this will actually happen, that your team will use the same criteria in their probabilities? It starts at about 70% for a single sales person (he’s tries to be consistent, but moods are capricious and perceptions shift), and consistency decreases rapidly with each new person you add to the mix.
This is where the methodology comes in. It must be simple to understand, easy to do, and repeatable. That means the sales manager must have rules. Understandable rules and enforceable rules.
What is really important to evaluating a sales probability? Three questions only: Is the customer really going to buy something? If he does, where do I stand in the competitive mix? And, when will he realistically do it? That’s everything you need to know in a nutshell, so ask those questions.
If it’s hard, it won’t get done well, or sometimes at all. So make it quick and easy. And nothing is easier than a check box. Ask the questions, give a short list of answers (how about Low, Medium, and High?), and have the sales person check the appropriate one.
Not only from forecast-to-forecast for each sales person, but salesperson-to-salesperson for every forecast. Just limit the possibilities to the essential choices and you’ll get repeatability.
Assign your own probability percentages to the possible combinations of answers, multiply that times the value of the opportunity, add them up, and you’ll have your forecast.