It’s not uncommon for sales managers to spend a great deal of time forecasting. It’s as equally common for these forecasts to yield misleading/inaccurate results. To get to the bottom of why so many forecasts prove useless, Vantage Point Performance, a sales management training company, recently carried out research on forecasting methods. Here is what they found:
How accurate are the forecasts reflecting the way the salesforce actually works?
About 85 percent of B2B sales teams run forecasting by the opportunities currently being pursued by the sale reps. They account for each stage of the sales process and apply various percentages to the accounts being handled in order to estimate the probability of a sale.
The issue with this type of forecast is that it weighs too heavily on opportunities. The better approaches include swapping out opportunities for forecasting done at the accounting level, which is useful for organizations that have a large amount of deals that are derived from current customers. Another more useful method is looking at the territory level, which is useful in organizations that cover a large geographical area. Finally, analyzing information at the call level proves to be a valid method for organizations making a large number of outbound calls.
To assist you in moving away from the opportunity model, try thinking about what is relevant for your salesforce and go from there.
Develop a forecast based on data and assumptions that makes sense to YOUR salesforce
Clearly, from the statistic above, too many companies are taking the standard opportunity approach to forecasting, which is something that’s been pervasive in sales for many years. What these organizations are doing is essentially trying to fit a foot into a shoe that is far too large, or too small. The results are erratic, and not worth the effort you put into it.
Some organizations have fallen behind in their ability to generate more advanced analytics. Data has become a vital portion of the sales process today, and that includes forecasting. The highest performers are getting a clear, granular understanding of the pipeline. Instead of relying on the age-old 50/70/90 rule forecasting, advanced analytics are giving organizations a clearer view of the landscape.
Can you say that you have a clear overview of your conversion and risk factors? Do you know the true velocity of your deals and opportunities? Companies with advanced ERP systems are able to say “yes” to these questions. However, implementing an ERP system is not for the average IT staffer. Taking the lead of a consultancy service is the best choice for companies considering a new ERP and/or CRM system.
One Vision Solutions has created solutions that include giving clients end-to-end business system implementation assistance that helps to improve the forecasting methods they use to predict sales. Our solutions offer real-time visibility into financial and operational management performance. If you want to take your business enterprise software to the next level but need assistance, contact us today.