We are barely a week into the New Year, but yesterday I found myself in a conversation with an executive team about the forecast. They were looking at the January forecast and starting to think about the quarterly forecast.
Sales executives are obsessed with forecasting and forecast accuracy. In my past lives, as a sales executive, I don’t know how many hours I spent looking at the forecast.
I’d play endless games with my sales ops VP, controller, and the RVPs. We’d have spread sheets and other reports, looking at different puts and takes on the forecast, trying to figure what was rock solid, what wasn’t, what we might be able to risk.
RVPs would be on the phones, interrogating the field managers, who in turn, would interrogate their people to figure out what we could forecast. We’d look people in the eyes, questioning “Are you certain…..?” If we saw a waiver, we’d wonder and interrogate further.
Despite what each person said, at every level of management, we’d always add our own “English” on the forecast…. “John is always overly optimistic, Jill sandbags every forecast……”
We knew the forecast would never be perfect, but it needed to be as accurate as possible. After all, the rest of the company was dependent on it. Manufacturing/production planned their build schedules and managed the supply chain based on our forecasts. We set analyst and market expectations based on the forecast.
Every month we’d go through the same exercise, every quarter we’d double down our efforts at accuracy.
Every sales executive I’ve encountered goes through their own version of this torture (for themselves and their teams.). The tools we use have progressed beyond Excel spreadsheets and CRM, but we still go through the machinations, guesstimates, and the same activities we always have gone through.
There has to be a better way—at least one that can create a similar outcome with much less time.
What if we started peeling back the onion on forecasting and forecast accuracy. How can we drive more accurate forecasts, how can we simplify the process?
Naturally, the information we have to develop our forecasts will vary by the types of things we sell, the volume and velocity by which we sell them. If we are selling production parts/embedded components, inevitably, our customer supply chain people are deeply involved in the order forecasts. This helps drive production planning.
If we sell high volume/high velocity or transactional items, there are many analytic techniques, leveraging historic trends and current activities that can help us.
If we are involved in complex sales, for example enterprise software, professional services, capital equipment/systems, design wins for production parts and so on, we are dependent on the assessment of sales people. How do we improve our forecasting then?
Peelng back the onion on this part of the forecasting process, an accurate forecast is dependent on a high quality, high integrity pipeline. The pipeline is the first source of data we look at to begin our forecasting process. But if we have sloppy pipeline discipline, if there is no integrity in the pipeline, it’s impossible to develop an accurate forecast.
Unfortunately, too many of the pipelines I look at are wishful thinking. There are deals that have been stalled since before the turn of the century, but sales people insist they are solid. There are deals that are deals only in the imaginations of sales people, but are not qualified opportunities. There are real deals, but target values and target close dates are filled with uncertainty.
These deals are spread through the pipeline, those in the closing and proposing stages are those that feed the forecast, but how did they get to those stages, are they really in those stages, or are they wishful thinking?
But in peeling back the onion, we can’t stop at the pipeline, we have to ask ourselves, what drives a high integrity pipeline. It’s the individual deals in the pipeline.
Are they qualified, is there a compelling urgency in the buying group to make a decision by a certain date? Do we have a strongly differentiated, winning deal strategy? Does our solution create superior value for the customer, and are we creating superior value in the buying process? Can we and our customers connect the dots on how this opportunity contributes to the overall corporate priorities?
But we have to peel the onion even further: Do we have a strong sales process that our people are using? The sales process is the foundation of strong deal strategies. It’s built our our best experiences of success. It forces us to focus on our sweet spot and to viciously disqualify deals that aren’t in our sweet spot or where there isn’t a compelling need to change. It forces us to align with our customer buying processes, doing the things that help bring clarity to what they are trying to achieve.
The sales process is the foundation to everything we are trying to achieve. If we don’t have a strong sales process, if our people aren’t using it as effectively as possible, our deal strategies will be weak, our pipelines will be weak or flaky, and it will be impossible to develop a high integrity forecast.
The analogy is, regardless of how fancy a house you build, if it is built on weak foundations, it will crumble (Residents of the Bay Area only have to look at the Millennium Tower as a vivid example of this.)
Yet too often, I encounter sales executives focusing their time on the forecast, not looking at the things that drive the forecast and forecast accuracy. It’s amazing what happens when you start at the foundations. A great sales process drives higher win rates, compresses selling cycles, higher deal value/margin. The sales process enables sales people to develop strong, value based deal strategies. These, in turn, build stronger pipelines, which help build better forecasts. But even better than better forecasts, they drive better results.
And, after all, forecast accuracy is not our goal. An accurate forecast that under performs our expectations is not very helpful. Harnessing everything we do, delivering on the results for which we are accountable is our job. The forecast is simply a report on how well we are executing.