5 Reasons Why 59% of Sales Forecasts Are Wrong

Would you let an octopus manage your sales forecasting?

…Statistically speaking, you’d be better off.

After all, celebrity cephalopod Paul the Octopus scored a prescient 85% success rate in predicting the outcome of Germany’s FIFA World Cup soccer matches in 2010. Last year, Goldman Sachs’ attempts to forecast the outcome of World Cup games weren’t even half as accurate: they only managed 37.5%.

37.5%. Even guessing randomly between two options is likely to yield a better result. Anyone looking at those numbers would conclude that Goldman Sachs’ FIFA forecasting system was worse than useless. That someone placing a bet would get better returns from painting two flags on mussel shells and asking a hungry octopus to take its pick.

But what if I told you that the average sales forecast is no more accurate?

That only four out of every 10 deals you’ve forecasted will actually close in the way you expect?

That’s right. 59% of sales forecasts are wrong. But before you replace sales managers with eight-legged sea creatures, let’s take a look at why that’s the case – and how to fix it.

1.You’re Struggling to Assess Your Current State vs. Your Targets

It’s easy to assign quotas to your team. It’s harder to make those numbers a realistic reflection of your business. It’s harder still to establish a system that’s flexible enough to respond to circumstances as you go.

The only way to tackle this is to find a top notch technological solution, that integrates with your CRM, and tracks which deals are being closed, what’s projected in the short term and what possibilities are hovering on the horizon. A system that helps you prioritize low-hanging fruit without losing sight of bigger, high-impact deals, redistributing resources and tweaking individual and team targets as required.

2. You Sink Too Much Time Into Forecasts

Sales managers spend up to 10% of their working week drawing up (inaccurate) forecasts. Why not spend that time exploring which deals are easier to win, and focus your energies on effective prioritising instead?

Focus on the key deals – the ones you’re confident you can win – rather than stuffing your forecast with over-optimistic leads to impress the C-suite. You’ll find accuracy rapidly improves.

3. You Let Changes Sneak Up On You

Is your team working dozens – even hundreds – of leads at once? There’s no way you can effectively track them all in detail, and by obsessing over the nitty-gritty, you’ll lose sight of the overall trajectory.

Instead, step back, look at how different types of deals are panning out, and strategize. With the right data, you can stop berating your team for missing their number and focus instead on coaching corrective measures that tackle problems at the root.

4. You Lack an “Early Warning System”

When a major opportunity crops up unexpectedly, what happens?

Inevitably, a glimpse of big game distracts salespeople from smaller fry. Chances are, they’ll plough their time and attention into this new direction rather than letting the opportunity pass by – even if there’s a risk the deal will drag. Meanwhile, other deals in the forecast are neglected. To avoid panic, it’s imperative that risks to your forecast flag up early, allowing you to tackle them in advance.

5. You’re Not Prioritizing Enough

Many failed deals are ones you shouldn’t have wasted time on in the first place.

If you have 12 deals in the pipeline and an average win rate of 25%, wouldn’t it better to purge the weakest ones from the pipeline and focus your energy on closing promising ones? Instead of scrambling to close three out of 12, wouldn’t it be better to spend more effort closing four out of six or seven instead?

Qualitative analysis is tricky, but if you find a solution that allows you to separate opportunities into “Must Win”, “Must Develop” and “Qualify Out” you can stop wasting time on false opportunities.

Predicting the future is hard, but trying to dictate it rather than following the clues means setting yourself up for failure.

Most sales managers make team members “commit” a deal to the forecast, essentially promising to close that deal that quarter. There’s little context or evidence to suggest that this is reasonable, but once there, the deal becomes a stick to beat the salesperson with.

Trouble is, bullying a salesperson doesn’t change the behaviour of the client. It doesn’t impact on buying cycles. It doesn’t make them more likely to bite. Arbitrarily fixating on a deal come hell or high water is counterproductive: it demotivates good employees and winds up potential customers.

Instead of swimming against the tide, start collecting and analysing data that tells you which opportunities are most likely to close, when and how. Work smarter, not harder: use this information to hone in on the best opportunities, boosting your success rate and accuracy, and proving your prowess in the process.

Comment 1

  1. Gary Ockunzzi 07/20/2016

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