Regardless, it´s not a perfect science. Accurate sales forecasting takes a bit of gut feel, but you need a system to add believability and use as a tool to evaluate your accuracy and share information with others.
A lot of sales teams use percent of close metrics — 60%, 70%, 90%, etc. I don´t like this type of forecasting, it´s too subjective. I´ve seen financial-types do the math to say you have a $100K sale forecast at 60%…so, we expect $60K in revenue. Crazy! You might as well throw darts at a spinning revenue wheel.
I like the following forecasting methodology, especially for complex sales:
1. Structured around the sale. Every sale has a cycle. And while every sale is different, all sales in a given market follow a similar pattern — prospect, qualified, quote sent, etc. Have a sales forecasting system that matches the sequential steps of your market.
2. Common language. If the sale is said to be at Stage 2, everyone should know what that means. Combined with the item above, have a forecasting method that becomes a language in your office — telling you where the opportunity is and what the next step is towards losing.
3. Review the forecast routinely. Once a week, sit with your sales people and review each opportunity. Focus on what it takes to advance the sale to its next step in your forecasting system.
4. Track your sales cycle. Track the historical time taken to advance a sale from one step to the next. Use this data to forecast when an opportunity should close and when the next step should occur. If you find a sale is stuck at a particular step 3-4 times the normal length of time, you may have a problem you need to focus on.
5. Get information at a glance. Regarding item 4 above, highlight sales on-track in green, slightly off-track in yellow, and way off-track in red. This gives you an at glance perspective of where your opportunities stand.
There are five forecasting favorites of mine. What favorite would you add to my list?