Your Sales Forecast Is Broken, But You Can Still Fix It

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Selling without understanding your sales funnel is like driving to an unknown location without a GPS or a map.

Selling without understanding your sales funnel is like driving to an unknown location without a GPS. You may reach your destination with an outdated map, but if you do, you probably won’t make it on time or under budget.

Sales funnel forecasting can help entrepreneurs understand what they do well, where they could improve, and how to optimize their operations for growth. Without that information, you may as well use a dartboard to plan for the quarters to come.

Unfortunately for many growing businesses, a dartboard might be an improvement. The 2018 Sales Operations Optimization Study from CSO Insights found that 35.6 percent of surveyed companies used casual or subjective approaches to sales forecasting. The same study discovered that formal and structured forecasts correlated with a 12.6 percent increase in win rates. Consider salespeople’s natural optimism in the face of more realistic projections, and it’s easy to see why accurate forecasts are so rare.

Despite the challenges, entrepreneurs should prioritize accurate sales funnel forecasting. Clearer projections empower them to make smarter decisions and pursue sales funnel opportunities they might otherwise not see.

Roadblocks to Better Sales Forecasting

Sales leaders and CEOs would love informed insights about their companies’ sales funnel forecasts. Sadly, a variety of obstacles stand between them and the accuracy they crave.

According to CSO Insights’ research, 47 percent of salespeople are too subjective in their evaluation of close possibilities. Even with hard data in front of them, salespeople tend to overestimate their ability to push leads through the sales funnel.

Not all the fault rests with salespeople, however. The same study found that non-predictive historical data (36.3 percent), inaccurate data (32.2 percent), and limited technological resources (24.6 percent) hamper companies’ forecasting abilities. Managers shoulder some of the blame themselves, as 19.6 percent of businesses have no formal sales methodology.

What will it take to fix sales funnel forecasting? Salespeople probably won’t stop overestimating their charm anytime soon. That’s not terrible news; optimistic salespeople tend to outperform their peers. Still, growing companies need a strong sense of their sales funnel to plan for the future — and it all begins with the right tools.

Where Sales Forecasting Tools Make a Difference

Before trying to predict your sales funnel for the next 10 years, stop to think about the purpose of the exercise. Forecasting sales for a long span may provide results too broad to be useful, while forecasting too little of the sales funnel may be more trouble than it’s worth. Pick an area where better data will lead to specific, actionable insights.

Once you know where you should focus in your sales funnel, turn your attention toward the methods that will lead to more accurate information:

1. Review old files, and collect new data.

Stock market experts love to remind investors that past performance doesn’t guarantee future results. When it comes to your sales funnel, however, past data provides an excellent starting point.

Gather information from years (or months) prior, and look at the crests and valleys of your sales funnel. What led to the good times? What made the downturns so rough? What kind of information would have helped you take advantage of more opportunities and avoid pitfalls?

You might not be able to predict every market shift, but you can use internal data to see which way the wind is blowing. Mixmax, a Gmail-based productivity application, recommends that businesses gather more specific data points (like whether prospects opened emails and the number of follow-ups required before a close) to create accurate forecasts. People should also check the amount of time they spend in meetings or on various sales activities, like administrative recordkeeping, to calculate more accurate timelines.

2. Define the process and metrics.

Anyone can draft a sales forecast based on instinct. Avoid subjective forecasts with random odds of success by designing a process that uses a set of predetermined metrics.

HubSpot advises businesses to follow a documented, structured sales procedure. While rogue reps may not appreciate following a system, replicable processes allow leaders to predict sales funnel shifts with greater accuracy. A team of 10 salespeople with 10 different closing processes can’t accurately assess the likelihood of a future deal closing. A team with a defined closing strategy, on the other hand, can predict closing success with a high degree of accuracy.

Don’t just set the process; refine it as you go. When salespeople fail to meet expectations, determine why and adapt. You may not be able to create a seamless sales funnel, but you can develop one that reflects reality.

3. Account for external factors.

Analytics company Prevedere warns that a variety of uncontrollable factors can influence sales forecasts. Consumers may suddenly decide they hate your industry. Economic shifts may push people toward luxury options or strip their ability to afford your products. Hurricanes may wipe out your vendors, leaving you without a supply. New legislation, changes in competition, and other factors can all throw wrenches in a sales funnel.

You can’t predict the unexpected, but you can build in wiggle room to keep your forecast on the right track. Expect to see minor downturns and booms every quarter, with major events impacting your industry every year or two. Look at past data to see how your company responded to crises in previous years, and consider ways to mitigate those troubles in the future.

Even the most rigorous sales forecasts are subject to the whims of the larger world. That said, smart entrepreneurs can keep their sales funnels flowing by improving their projections and accounting for relevant factors. Keep these tips in mind to create a sales forecast that will allow your company to accurately anticipate sales — and revenue.

Originally posted on Forbes.

Rhett Power

Rhett Power is Best-Selling Author, Executive Coach, Columnist at Forbes, Inc. & Success. Rhett Power co-founded Wild Creations in 2007 and quickly built the startup toy company into the 2010 Fastest Growing Business in South Carolina. Wild Creations was named a Blue Ribbon Top 75 US Company by the US Chamber of Commerce and named as one of Inc. Magazine’s 500 Fastest Growing US Companies two years in a row. He and his team have won over 40 national awards for their innovative toys. He served in the US Peace Corps and is a graduate of the University of South Carolina. He now has a rapidly growing coaching and consulting practice based in Washington DC.

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