Your Sales Forecast Isn't the Problem
"Forecast uncertainty is only a symptom of the deadly diseases killing sales organizations."
piLYTIX regularly receives calls from business leaders in desperate need of forecasting help. The calls typically spike right after corporate earnings are announced. Panic has already set in at companies that recently posted disappointing results. Our original business offering – simple as it was – provided detailed sales forecasts for large companies who needed forecasting help because of missed targets or disconnects between sales, marketing, operations and finance.
In analyzing client data to assist with forecasting, we quickly learned that missed sales targets are largely symptoms of crippling diseases. Like a doctor who only treats a patient’s symptoms, we found that companies that did not address their underlying challenges would always be at risk of missing forecasts.
These challenges broadly align to four core competencies. Companies that understand these four competencies are better positioned to hit their forecasts. More importantly, they are better positioned to close more business and save time, effort and money in the process.
Opportunity Management: Most organizations struggle to understand the driving forces that make deals more or less likely to close or they lack the mechanisms to enable their sales talent to recognize these forces. Missed sales forecasts are usually accompanied by pipelines that yield many disappointing surprises. Companies that can analytically interpret the data about their opportunities without relying on rep intuition will have fewer surprises. Likewise, when reps’ blinders are removed and they can see their deals’ underlying weaknesses, they are much better positioned to take corrective measures. In some cases, they may choose to focus their energies on opportunities that are statistically more likely to close and spend less time on deals that have little chance to close.
Talent Management: Coaching and training programs tend to be based on average profiles or a couple traits of past top performers rather than quantifiable strengths and weaknesses of each individual rep. As a result, too many organizations rely on a “star system” in which tenured reps receive better opportunities or more territory. Simply stated, too many tenured reps are successful simply because they are tenured. This often comes at the expense of more recent hires who might be more capable of closing specific types of opportunities than the tenured reps. The outcome: lost revenue or, at a minimum, significant inefficiencies in the sale organization.
Data Quality: Too many companies blindly accept as fact that more data equals better data. They mistake quantity for quality. These organizations often attempt to implement major data capture policies where enforcement causes friction; reps want to be selling, not acting as data entry clerks. Other companies are paralyzed by the “garbage in, garbage out” mantra. They assume that if it’s not great, then it must be garbage. If it’s garbage it will take time and money to fix it. Time and budget tend to be in short supply, so they kick the can down the road. Presumably, they are waiting for the day when they won’t have short term sales emergencies or when their reps magically begin uniformly entering data. Neither of these situations is ideal but managers often don’t have the time, resources or know-how to properly address data collection and quality. Consequently, bad habits persist making long term predictability (and sales success!) challenging.
Pipeline Health: Traditional metrics of pipeline health are directionally helpful, but too many organizations over-rely on these metrics and struggle when conditions change. For example, some managers will assume that if they hit their target last year and this year’s target increases by a certain percentage, they just need to ensure that the number of opportunities in their pipeline this year increases by the same percentage. Without a firm understanding of the quality of the opportunities in the pipeline and the capabilities of the individual reps that make specific deals more or less likely to close, relying on this type of oversimplified metric tees these organizations up for disappointments.
Poor opportunity management, mismanaged and misaligned talent, poor data quality and an unhealthy pipeline all are underlying diseases that should be cured to heal forecasting accuracy. The solution to all of these challenges begins with a dedicated organizational focus to capture, interpret and act on the stories in your sales data.
Jim Dries is the sales rep in chief and head data geek for piLYTIX.