How to Generate Reliable Forecasts

In the third instalment of ‘What Makes an Outstanding Sales Manager?’ our Chief Commercial Officer, Janet Garcia, will be using her many years of success within sales leadership to advise the best way to accurately forecast revenue figures.

Forecasting is one of the eight skills that comprise exemplary sales management. Janet has taken pride throughout her career in the accuracy of her forecasts, and that accuracy is one of the reasons she has commanded such respect at Board level for the companies she has worked for.

But forecasting is so difficult – surely what will be, will be?

It is completely unacceptable for any sales leader to not be on top of forecasting. It amazes me when I am called into organisations where inaccurate forecasting is widespread in the leadership and management teams. One of the reasons for this could be an over-reliance on CRM systems. Most organisations that have a CRM system will rely on the CRM for forecasting, however, we must remember that the CRM is there to serve the organisation, rather than the salespeople being there to serve the CRM – it shouldn’t be the tail wagging the dog. Too often CRM input is seen as a chore, where the inputting of data becomes the task and accuracy is of secondary importance.

The value of forecasting must be relayed to your team members; they must understand that strategic decisions are made on the basis of their forecasts. Bad forecasting leads to bad decision-making throughout the organisation, as resources and cash flow can be under-estimated or over-estimated as a result of bad forecasts.

Can forecasting be delegated to an admin function?

No. I think managers go wrong when they rely on the automation of CRM, absolving themselves of responsibility for the forecast. Sales leaders have to take responsibility for forecasting – it cannot be done at arm’s length: the sales team must be challenged and their assumptions questioned, and for larger opportunities there is an acute need to investigate the possible risks and upsides because of the potential impact on results.

Through a filtering process, including your own experience, that of your team, knowledge of clients and market trends, you should be able to deliver back to the business a fully tested and accurate forecast.

How else can you improve forecasting?

If you are in sales management and you have been through at least one full sales period, you should have a feel for how your pipeline acts and points in it where deals get stuck. You can focus on these and make sure your salespeople have a plan for moving accounts forward at these points. You will also know your team: who is or isn’t reliable at forecasting; who over-forecasts and who under-forecasts. Using this knowledge you can then develop strategies for improving the forecasting skills of each team member.

Before the end of every month, schedule clear times in your calendar dedicated to numbers – to give yourself time to lift out of the day-to-day and look at your forecasts. You need to spend the time wisely and have candid, in-depth quality coaching conversations with each and every one of your salespeople or managers to create accuracy within your forecast.

But aren’t salespeople all optimistic by nature?

In my experience there are four types of salespeople when it comes to forecasting, and in each case, their behaviour when forecasting normally reflects their sales style. So any issues with their pipeline may well be symptomatic of a wider competency issue in their role. The different types are The Optimist, The Pessimist, The Wannabe-hero and The High Performer.

The Optimist will look on the bright side and presume that all the deals will come in on time. They believe everything that they are told by their clients, because they want to. They are excitable and if they had tails they would wag. They don’t want to think of what could go wrong, and so don’t always challenge their accounts enough. They will quite often be ‘let down’ or have unforeseen obstacles that crop up. The Optimist needs coaching, as it is possible that their behaviour reduces credibility with their clients – as without challenging them, they may not make the leap to Trusted Advisor.

The Pessimist doesn’t want to put any numbers in as they are over-conservative and don’t believe it until they have a contract signed in blood. To under forecast shows a lack of control and also possibly a confidence issue. As with the Optimist, this lack of confidence may rub off onto their clients – they also need coaching to have the courage of their convictions that if they are doing everything right, the deal will come in and they should forecast accordingly.

The Wannabe-Hero is known for ‘sandbagging’ or storing deals up and keeping them secret so that they can come in as the knight in shining armour at the end of the sales period and be the hero. Whilst a lot of salespeople will dream about doing this, if they are so driven by their ego in their pipeline, you need to question how ego-centric they are with customers. The customer should be helped to sign a contract according to their Buying Cycle, and not just when it suits the salesperson, so the Wannabe-Hero also needs coaching in this area.

The High Performer will manage expectations and be honest, challenge any assumptions, work with the client to remove obstacles, always be realistic and transparent in their numbers and above all communicate at every stage. You can rely on them, they always deliver, they are a rock. Unsurprisingly, this experience of feeling like a true partner is the experience that their clients will have as well, which is probably why they keep buying from them, there is a mutual respect and they don’t get messed about.

Any final thoughts?

The reason for challenging the pipeline rigorously is for transparency, so you can manage expectations and do something about it, if necessary! There is no point burying your head in the sand and sticking with a forecast that you know isn’t accurate – this attitude will only cause bigger problems down the line.

If you would like to read more about the components of the Sales Management Programme, then please click here.