At Growth Process Group, we focus on complex sales scenarios involving large transactions with medium to large companies.
A common definition for forecast accuracy is the percentage of the bookings dollars that were closed in the quarter as compared to the forecast at the start of the quarter. Some companies use a monthly metric.
To improve forecast accuracy, you need to adopt a consistent sales process. We advocate the development of Sales Process Models that include the desired prospect/customer commitment action at each stage. When you measure pipeline position by customer action, rather than sales optimism; you have a much clearer view of the pipeline quality and you are able to start improving your forecast process and accuracy. Here is an example of a portion of sales process model with customer commitment added at each stage:
We suggest the use of specific “Exit Criteria” to help sales leaders determine if a sales cycle is eligible to proceed to the next stage. This is an example showing specific exit criteria:
The next step is to assign probabilities to the stages in the model. Probabilities should be based on past date, if it exists. If not, experienced sales leaders can assign reasonable probabilities as a starting place. These should be modified as soon as sufficient transaction data is available. With this approach, weighted forecasts move more toward data-based than opinion based.
It is important to recognize that not every sales process follows a serial path. The definition of acceptable alternative paths for deals helps sales leaders coach their reps on how and whether or not to proceed on a deal. This shows an example of alternate paths:
Notice the “STOP” element. Many sales organizations do not have rules on when to stop selling. If your sales team is effective at terminating sales cycles early for deals that are unlikely to close, they can focus on the high quality prospects and sales productivity improves. Doing this well means you have to develop good criteria for deals that are good fit vs. those that are not. Implementation of Rules for Stopping sales cycles is a key element in improving your forecast accuracy.
To improve your Forecast Accuracy, develop and apply Perfect Prospect Profiles, Qualified Lead Criteria, Sales Cycle stage exit criteria, Forecast Rule Sets and win probabilities that are data-based. If you adopt a continuous improvement method for each of these elements, the result will be improved forecast accuracy.
Contact Growth Process Group to improve your Forecasting Process and Forecast Accuracy.