On December 17th, Market-Partners Inc. CEO and Founder, Martyn Lewis, hosted a virtual micro-workshop sharing the results of some of our most valuable forecasting studies and surveys, giving you new insight into the circumstances creating forecasting discrepancies – and exactly what you can do to go from misery to mastery.

This free micro-workshop followed our 30-30 format. The first 30 minutes were an interactive presentation of the content summarized below. Afterwards, those wishing to explore the topic deeper were invited to stay an additional 30 minutes dedicated entirely to questions and discussion.

The first 30 minutes have been summarized below, covering the effects and causes of forecasting misery, four tips for forecasting mastery, and a dynamic method for using forecasting as sales coaching.

You can also watch the video replay here.

Summary

Sales forecasting is, and should be, a fundamental component of the sales function for any company. Regardless of their industry, organizations must know where their business is heading, how to match their supply to their demand, and where to invest and divest their resources to capitalize on opportunities.

However, despite forecasting’s critical importance, the state of play is abysmal. From a study we conducted of more than 1,200 sales organizations, we found that:

• 90% of sales opportunities do not close as forecasted

• Of opportunities marked as “75%,” less than one in six close as originally forecasted

• 55% of forecasted deals are ultimately lost

In the same survey, we also asked, “To what extent do you think you could improve your overall business performance as a result of superior forecasting practices?”

• No one who responded thought there would be no impact

• 26% responded there would possibly be an impact

• 28% responded there would probably be an impact

• And an overwhelming 46% reported there would definitely be an impact

As a result of these discrepancies, our research shows organizations invest more time, into more systems, using more complex approaches, for little to no gain. That means we are taking more energy and effort from sales leaders and front-line salespeople to achieve no meaningful results. These inefficiencies are most felt when it comes to sales coaching; the number one reason we hear from sales managers as to why they don’t have time to coach is that they are spending that time forecasting.

Worst of all is that sales leadership typically defends their current forecasting approaches, even when they don’t work.

The 7 Causes of Forecasting Misery

1. Forecasting to Achieve a Goal: a firm creates a goal of 10 million this quarter, therefore needs to forecast 10 million even if it’s impractical or impossible

2. Forecasting Sales Closing Instead of Customer Commitment: when your customer is going to be in a position to buy is not always going to line up with when you’d like to close

3. Misusing Forecast Probabilities: forecasting probabilities are usually meaningless, not reflecting any statistical reality in terms of whether or not a customer will buy

4. Either Win It or You Don’t: you can’t get 50% of a deal…

5. Forecasts as Pipeline Stages: your sales forecast and your sales pipeline are not the same thing

6. Forecast Reviews as Story Time: during a forecast review, stories and excuses on why numbers are missed, or deals did not close, often lack useful information

7. Lacking Individual Accountability: when sales managers override what the sales rep is telling them because they “need the deal to close this quarter,” we lose individual accountability

Forecasting Mastery

1. Separate the Pipeline from the Forecast

Contrary to popular belief, the sales pipeline and forecast are two very different things.

Every opportunity you are working on, regardless of likelihood that it will close, belongs in and is a part of your pipeline. The forecast is a subset of the pipeline; those opportunities you believe, with a degree of certainty, you will close sometime in the future.

As we discussed extensively in Myth and Magic of the Sales Funnel, you should never tie the stages of your pipeline to forecasting probabilities. When organized in that way, salespeople will game it out of necessity, being forced to hold some opportunities back while moving others forward based on the confidence they can close the deal, not where the customer actually is in a purchasing decision. This undermines the integrity of both the pipeline and the forecast.

This is why the stages of the sales pipeline must represent the stages of the Buying Journey. Not only is your customer’s buying process the only one that ends in revenue, but it also gives organizations objective criteria as to where opportunities are in their funnel.

2. Segment the Forecast into Sub-Pipelines

There is very rarely one pipeline making up all of an organization’s revenue. Business may come from run rate, small deals, upgrades, new deals, and many other product and service categories. Therefore, sales opportunities flowing through these different pipelines will need their own metrics, such as average deal size, close ratio, or cycle lengths.

Perhaps unsurprisingly, each of these pipelines should also have their own forecasts. Some of these will be rather simple. For example, you might already know 90% of your customers renew, so your renewal forecast can be solved with a basic trend analysis. However, a statistic like this could give you important insight – if renewals alone cover 80% of your pipeline, then only 20% of that needs to be forecasted new deals.

3. Shift the Focus from When the Salesperson Will Close to When the Buyer Will Be in a Position to Commit

As an opportunity moves from interest to commitment, the salesperson is usually forecasting it, while from the buyer’s perspective, the real work has just begun. This can be seen below in this generic macro Buying Journey.

As the customer is attempting to overcome these hurdles within their organization, the salesperson is almost never in the picture. They mistakenly think their “champion” is “running with it,” letting hope and optimism slowly kill the deal.

This is exactly why we must map and manage the Customer Buying Journey. When we understand where the friction and hard work is during the buying process, we can better support our customers through their purchase and into successful adoption. The good news is that these once hidden roadblocks, when uncovered, are predictable across any given market, allowing firms to create ultra-effective approaches to dealing with these obstacles.

4. Shift the Attention from the End of the Sales Pipeline to the Start

The reason meeting sales quotas is a challenge for so many firms is actually very intuitive – there are not enough opportunities going into the sales pipeline, and those that are do not move fast enough. Like with any process, if you want more out, you have to put more in, and that fact should shift the focus from the end of the sales pipeline to the start.

The part that remains counter intuitive though is that the beginning of the pipeline should be high speed and high churn. While it flies in the face of a “sales funnel,” you do not actually want a disproportionate number of leads in the earlier stages of your pipeline. Rather, you should be qualifying leads quickly, seeing if and where they are in a Buying Journey to better focus your efforts. Because of this, the mid to end of your funnel will be lower speed, lower churn, as you focus on supporting and managing those customers through their buying process.

Power Forecasting

Power Forecasting is how we move forecasting from an administrative task to a fundamental performance coaching tool.

It all starts with The P.D.L.A. Cycle: Plan, Do, Learn, Adjust. This cycle is the heart of any kind of performance coaching, but it can be particularly beneficial when it comes to forecasting. When we forecast, we are already planning. The key is then looking back at the end of the period, learning from what actually happened, and then adjusting selling practices to set and achieve future forecasts.

Finally, instead of sales managers saying they do not have time to coach, because they are forecasting, they are coaching while they are forecasting.