Why Accurate Sales Forecasts Are Difficult to Achieve
Despite all the labor companies put into their CRM systems, too often sales projections are not particularly accurate. Sales forecasting is a key management skill and so it would seem that the investment in technology as well as in developing sales processes would help managers do a better job of forecasting.
So why hasn’t this occurred? The technology is exceptional and for the most part companies do a good job of defining their sales process. The challenge that many sales organizations encounter is when they equate their sales process with the stages an opportunity goes through in its sales pipeline. As a result, they end up with numerous opportunities that have stalled and inflate the overall value of opportunities in the sales pipeline.
Only Customer's Actions Should Move Opportunity Forward
While there is nothing fundamentally wrong with converting your sales process into pipeline stages, it is essential that the criteria associated with each stage (i.e., the things that need to occur before an opportunity advances to the next stage) are driven by customer actions. In other words, it is the customer actions that need to trigger advancement through the sales pipeline, not the sales activity.
For example, it is a lot more meaningful for a design firm to have as a stage in its sales pipeline “customer sign off on a prototype” rather than “prototype has been submitted to the customer for approval.” Although both actions are necessary, only the customer’s actions move the opportunity forward through the sales pipeline.
Measure Velocity to Prevent Bloated Pipelines
Another key factor in providing more accurate forecasts is measuring the velocity of opportunities in the sales pipeline. How long has an opportunity resided in a particular stage without advancing? Closeable deals have a certain momentum as they move down the pipeline. By establishing reasonable time parameters for each stage of their sales pipelines, companies can ensure that their pipelines don’t get bloated. Opportunities that “get stuck” in a particular stage too long should be excluded from the sales forecast.
Sales organizations can significantly enhance the investments they make in CRM systems and sales processes by having sales people adhere to the customer driven criteria associated with each pipeline stage and applying time parameters to ensure only active opportunities are included in management forecasts.
About Norman Behar
Norman Behar is Chairman and Managing Director of the Sales Readiness Group (SRG). He has over 25 years of senior sales management experience, and is recognized as a thought leader in the sales training industry. His blog posts and whitepapers are frequently featured in leading sales enablement publications including ATD, TrainingIndustry.com, and Selling Power.