Sales forecasts are important. There’s no question about that. A forecast not only helps set expectations for your finance team and overall company, but for some of you, those numbers also go to a board of directors, or even Wall Street.
Research from Vantage Point Performance found that on average, managers spend 10-15 hours a month on forecasting. But if you ask a frontline salesperson, a sales forecast is the last thing they’ll cite as useful.
The truth about sales forecasts
Jason Jordan, partner at Vantage Point Performance, told us that sales leaders probably don’t appreciate how much effort is put toward forecasting – an activity which has never helped anyone close a deal.
“If you’re the captain of a ship, a forecast predicts what time you’re going to land on the shore. But there’s all these other things you should be paying attention to, which is running the ship,” Jason explained. “Every now and then you should look up and make sure you’re on time, but most of the effort should be on getting there on time.”
What’s more, 69 percent of salespeople don’t even trust their own forecasts. This report that’s taking up so much of your time is much less accurate than you think. As a sales leader, you can’t not forecast. But Jason recommends being much more deliberate about who the forecast is important to, who receives it and how much effort you are putting into it.
When it comes to yearly forecasts, trust your finance team. Give them the overarching revenue number of growth percentage you’re targeting this year. Then let them run models and ask for details when needed. Spending 20 hours a week on the forecast isn’t going to make it more accurate than spending 30 minutes a week, Jason added.
Spend more time on pipeline management
Of course, you still need to keep your finance team abreast of what will and will not close this month or quarter. That’s where pipeline management comes in. Part of the issue with forecasting is that people often confuse it with pipeline management, Jason explained. Pipeline management is about winning more deals and coaching your salespeople around the forecast. But forecasting is just picking a point in the future and committing to it.
“Pipeline management is about changing management and sales rep behaviors so that those active deals in the pipeline become more likely to be won and less likely to be lost,” Jason said explained during a webcast last fall.
The distinction between forecasting and pipeline management is critical. Research shows that companies who are effective at pipeline management have a 15 percent higher growth rate than those who are ineffective.
Pipeline management means sales coaching
Pipeline, itself, isn’t manageable. You can’t make a customer buy. But you can manage sales activities, which means that sales coaching must focus on the activity-level. There’s research to prove it: According to a recent study from CSO Insights, sales leaders must manage the right activities and coach the related behaviors to achieve their desired sales results.
If you haven’t already, define the key selling activities that make up your sales process (a quick guide on that here). Calculate how much of those activities you need to hit quota, then create personalized performance scorecards for each rep so that they can track performance against those goals.
You can also use a sales management system to monitor and calculate pacing for activity metrics in real time. These tools help you identify areas where an individual rep (or your team as a whole) is struggling and, therefore, understand precisely who, what and when to coach.
As a sales leader, your job is to monitor and course-correct pipeline performance in real time. When pacing to goal falls behind, you can rally your team around getting back on pace with a team coaching session or quick spiff. Be sure to also have weekly one-on-one meetings with reps to consistently review holistic performance and key challenges.
Interested in learning what activity metrics are used by top sales teams? Grab a copy of the 2017 Sales KPI Report below.