A valuable indicator of the true state of our business is the sales forecast. It’s only by attempting to build it that we can start seeing correlations and discrepancies between revenue flow and costs or become prepared to manage new opportunities or lurking issues within our team and pipeline.
Whilst we all understand the important part the sales forecast plays in our business, there remains to be a certain ‘finger-in-the-wind’ approach to casting it – making the gap between predicted results and reality too wide for comfort.
We’d all agree that this is due to its complex nature. So complex, in fact, that we’ve decided to research and write about the topic in a recent eBook titled ‘5 Steps to a Believable Sales Forecast’. In its pages, you’ll find tried and tested best-practices that will help you build a solid, bulletproof sales forecast.
In today’s blog, however, we’re looking at 5 of the most common mistakes made whilst forecasting.
1. Basing decisions on assumptions and gut-feeling:
Undeniably, there’s a very visceral side to Sales. We buy from and sell to people. It’s only through this emotional intelligence that we can truly connect to our prospects, identify their pain points and even fathom a pretty good guess of what they need and when they need it.
But guesstimates, can only get us so far.
Hunches can be a powerful tool for a sales person. But only when based on appropriate and comprehensive data.
Sure, even a forecast built on trends and behaviour patterns may still catch us out occasionally but basing our predictions on demonstrable reasoning gives us a better chance at getting it right.
A forecast based on data will always outperform one reliant on supposition.
2. Reluctance to use AI, Machine Learning and Big Data:
These big terms have erupted into every aspect of our lives, albeit with different levels of popularity.
If we look beyond mediaspeak and make peace with the fact that everybody and their mother is trying to jump on the bandwagon, we’ll quickly see the obvious business gain these new practices can have on things like our sales forecast.
We simply can’t compete with the agility and speed our mechanical cousins have when looking at data. And why would we want to?Far from seeing these new technologies as the menace of our current job status, we need to see them as capable assistants that will enhance our experience and help us reach much better results. Faster and at scale.
Look at this quote from Tony J Hughes:
As you think about your future in sales, don't confuse 'job' with 'task'. Your job is safe if you automate as many tasks as possible... the ones where 'the machine' can do it for you better, and as your assistant.
To forecast accurately, we need to be able to understand big data. We need to be able to learn from what has happened in the past, take into consideration what is happening in the present and throw together a version of the possible future.
And for this, we need tools to gather information, technology to help us dice it, and an analytical eye to glean any outcomes from it.
Your forecast tool needs to be a real-time, collaborative platform that showcases the true vital signs of your business; continually showing you changes as these happen.
3. Not making your sales reps participant:
Our sales reps, and how they follow our sales process, can hugely impact our forecast.
Sales people have a tendency to be overly optimistic. In fact, research carried out by Pipedrive revealed that salespeople spend an additional ten days closing deals than their initial sales forecasts had predicted (with those lower sales performers taking over 53 days to close their average deal).
On the other hand, the quality of the data you rely on to forecast is very much in the hands of your sales org.
Whatever goodness you may be getting from your CRM system is dependent on them inserting it into the system.
It is therefore imperative that they understand the urgency of keeping records tidy and up-to-date.
We’ve written extensively about the strange love/hate relationship between sales reps and CRM. You can find six tips to getting your CRM to work for you and not against you in this guide.
4. Immobility within the set forecast:
A good sales forecast, is an unfinished forecast.
The data necessary to build a strong prediction is always changing and so, thinking of our forecast as a static, finished piece is a common mistake that’s hindering its accuracy.
Don’t be afraid to keep revisiting your calculations, tweaking it to better meet the current situation of your business and vertical.
5. KPI Misalignment:
What does success actually look like for your organisation? It’s very difficult to agree whether you’ve reached your desired goal, if you never spelled out what it was in the first place.
Unless the whole team agrees on which success metrics to follow, you’ll all end up measuring different things, chasing different objectives and building a forecast around unmaterialised targets.
Are you measuring the right sales KPIs? Find out here.
Building a Believable Sales Forecast
Admittedly, building a forecast that is 100% accurate is verging on the impossible - circumstances may always change, opportunities may suddenly vanish.
What’s certain is that by deploying the correct technology, utilising good data, paying attention to the right trends and behaviours, you’ll be closer to creating a resilient, adjustable strategy that will prepare you for what’s around the corner.