“Accurate Forecasting”: Is it Really an Oxymoron? (Not if You Follow This Plan)

Many sales executives would probably say that accurate forecasting is their most important responsibility. For public companies, investors and analysts look at the forecast as a barometer of future performance; confidence in the company and the stock price are impacted if actual results differ from those forecasted.  Forecasts are used by executives to properly adapt the operation to their view of the future.  Workforce expansion is one example.  The forecast is also important when it comes to making decisions about new product development and other investments. 

Yet many companies are unable to achieve on-target forecasts.  The impact can be devastating.  So how can companies turn what for many is an inaccurate art into an exact science? 

Forecasting Getting You Down?

Accurate forecasting can be realized by practicing the four key steps described below:

1.  Utilize "no wiggle room" stages to grade opportunities.  Stages must be defined that precisely grade the status of individual sales opportunities.  These stages must be unambiguous and reflect key qualitative events completed with the buying organization.  For example, "Assessed Needs" is not good enough.  "Defined needs with the Power Promoter, discussed and gained acceptance of an Action Plan, and achieved agreement to these items in a Letter of Understanding" is unambiguous, not based on seller opinion, and warrants assigning an "A" stage with a 50% probability of closing.

2.  Managers must rigorously grade opportunities, which will not only result in an accurate view of the pipeline but also an accurate forecast.  We believe that one of the key roles of the sales manager is to analyze and grade opportunities.  The objectives are to:

• Identify and rectify ambiguities, misqualifications, etc. (if not rectified, the opportunity should probably be disqualified)
• Using those no wiggle room stages, accurately grade the opportunity.

Once the manager has graded the opportunity, the result is an accurate probability of closure.  This, in turn, results in managers furnishing an accurate opportunity-based forecast (not sellers, because having sales people forecast is akin to letting the Congress balance your checkbook).

3.  Have sales people follow a well-defined sales methodology.  As it pertains to forecasting, this is particularly important when it comes to a sales person defining, managing, and controlling their sell cycles.  In fact, to do so they should employ an Action Plan, aka, a "sequence of events".  The Action Plan identifies all key steps, with anticipated dates, leading to a buy decision.  This in turn will result in an accurate close date, valuation of the opportunity, and revenue recognition.

4.  Utilize a CRM that fully supports your processes.  We have found that far too many organizations use CRM’s that force the sales operation to adapt to it instead of it optimally fitting the processes of the operation.  Importantly, based on the stages opportunities are in (and their associated probabilities of closure) and their anticipated close dates, the CRM should calculate an accurate weighted forecast.  See the example shown below.

An Accurate, Automatic, Pain-Free 90-Day Forecast

In summary, the combination of well-defined stages providing accurate win probabilities, use of Action Plans by sellers, the grading of opportunities by managers, and calculation of a weighted forecast through a process-aligned CRM results in forecasting being relatively easy, pain free, and very accurate.