3 Strategies to Improve Sales Forecast Accuracy

 The single most important issue in any sales organization is managing the funnel to achieve an accurate sales forecast. Let's look at two ways this core issue is typically handled.

Company A's funnel process uses one of the most common approaches to forecasting, orienting its sales funnel to the steps of its sales process: qualifying, opportunity identified, quotation provided, demonstration delivered, and negotiation/close. You know the drill.

Company B uses a funnel based on the customer's buying process. Each stage of the funnel identifies specific actions that customers take when they are moving forward in their buying process: agree to a meeting, acknowledge their pain points, meet with 2nd decision-maker, define buying criteria, request a proposal, and so on.

Can you guess which sales funnel design leads to better forecasting accuracy? Right. Company B. By a big margin. If your company has a sales funnel more similar to Company A than B, here are three tips to get you started down a more accurate forecasting path.

1. Define the steps in your sales funnel and CRM based on customer actions.

In Company A's funnel structure, sales opportunities are tracked based on sales tasks performed by the salesperson. In a selling-focused sales funnel, it's easy to be deceived: a rep is confident that an opportunity will close successfully because they've done everything they're supposed to do. But tracking sales rep actions doesn't help you predict what a customer is going to do.

In contrast, Company B has specific criteria in its sales funnel that indicate whether a customer has completed one step of buying and is moving on to the next. The better a sales rep becomes at having customers complete next-step actions, the more consistent and more predictable the sales funnel becomes.

With a buying-focused sales funnel like Company B has, if and when a buyer chooses not to move forward, alarm bells go off. Sales managers are alerted to the problem right away, and can intervene while there is still a chance to fix the problem and get the opportunity back on track.

2. Transform Your Reps' Perception of CRM from a Pain to a Gain

The work of defining a customer-focused funnel has a second benefit: Any rep who thinks negatively about the extra time and effort needed to input information into CRM will quickly see personal benefits from a Company B-type approach.

Look at it this way: Company A's sales funnel generates sales process statistics that are lagging indicators (data collected after a process is complete) - such as how many calls, appointments, demos, and quotes have been made (or not made). By the time these data reveal a problem with a rep, it's way too late for a sales manager to get involved in a specific opportunity and put in a fix. All managers can do is exhort the rep to, once again, "try harder."

Company B originally had a CRM system like Company A, but realized that its use by the sales force was poor. Punishing people for not using the system didn't work, and the lagging indicators weren't helping anyone improve. They discovered that having a more customer-focused sales funnel was just the ticket for turning its CRM into something that both reps and managers would want to use. Salespeople can now be more precise in describing which opportunities are or are not moving forward, and they know where the trouble spots are. Also, sales managers have better visibility on customer actions in the earlier stages of the sales cycle, and can provide more timely advice to sales reps.

3. Re-focus your sales managers on coaching opportunities from beginning to end.

In Company A, forecasting is the process of tracking opportunities that are closest to closing. That means sales managers typically get involved when opportunities are at or near the Negotiate/Close step, often riding in to save the day if there is a sign of trouble.

Company B's system places much greater emphasis on having sales managers coach reps through each customer milestone from initial contact to after-sale follow-up. Managers more quickly recognize the importance of coaching early-sales-cycle selling skills - so their salespeople are better at getting more and bigger opportunities into the funnel in the first place.

Proactively Managing Sales Funnels and Forecasts

As you may have picked up, the real difference between Company A and Company B is that the former does sales forecasting reactively-near the end of sales opportunities. Company B, however, is proactive. They view their funnel as a way to help them become truly customer focused: during each step in the buy-sell process, its reps are thinking about what the customer needs to do to move forward in buying.

5 Sales Coaching Questions to Better Qualify Forecasted Deals

 There's no more frequent conversation between a sales manager and a sales rep than one that starts, "What are you going to sell this month?" And all too often, the rep's projections come up frustratingly short of forecast. Here are five questions you can ask your salespeople to help you evaluate how much trust you should place in the accuracy of their forecasts. These questions will also help your reps focus on actions they can take to improve the odds of closing their deals.

1. What actions has the customer taken thus far in their buying process?

Most sales managers ask salespeople something like, "Where are we at with the XYZ sales opportunity?" But that question is focused on where the salesperson is at in their sales process, not what actions the customer has taken.

So don't ask about the rep's sales process. Instead, ask questions focused on where the customer is in their buying process and what buying behavior is occurring. For example, "Has the customer shared inside information?... Arranged a meeting with a 2nd decision-maker?... Called your references?"

There are two reasons to ask these questions: First, the actions a customer has taken are a much better indicator of if and when a deal will close. Second, you will be a more effective sales coach when your questions force salespeople to think about the customer's point of view. Your reps will become much more focused on what actions they can take and what information they can provide to help a prospect move forward in their buying process.

2. What problems does this customer have that we can solve?

Note the plural "problems" in that question. If a salesperson has identified only one customer problem that your solution can address, the sale is more likely to fall apart.

Think of this way: Salespeople get an appointment because a new prospect is experiencing some type of dissatisfaction. But the mistake many salespeople make is not continuing to probe for a 2nd need that the customer may have. Often times, it's the ability of a salesperson to identify a 2nd or 3rd customer need that distinguishes him or her as a true consultant in the customer's eyes. The more plentiful and urgent the customer's needs, the faster the buying decision typically occurs.

3. What are the customer's top 5 buying criteria?

Many salespeople make the mistake of moving directly from identifying needs to presenting their solution. They forget to ask the customer, "What factors will be most important to you in your buying decision?"

The purpose of this sales coaching question is to make sure that your reps have thought about what solution requirements the customer will use to evaluate alternative offerings, and which of those requirements will be most important in the final purchase decision. Salespeople who understand a prospect's specific requirements and how they rank in priority can deliver a much more persuasive presentation & proposal.

4. Who else are they talking to?

A salesperson who does not know which competitor(s) they are up against will be unable to communicate your company's value proposition in a compelling way. From the customer's perspective, comparing one solution to another ensures a better buying decision.

If a salesperson is unable to tell you who else is competing for this account then either that person forgot to ask the customer, or they don't have a sponsor in the account-meaning there is no customer contact who is a strong supporter for your company. Asking this sales coaching question can help prevent your reps from being blindsided by a competitor that has snuck in the back door, causing your "sure thing" sale to tank (and ruin your forecasts).

5. What changes will you need to make in the future to make the most out of this coaching discussion?

In this question, you get sales reps to shift their focus towards the future. By this part of the coaching conversation you know what areas of weakness exist in the salesperson's sales approach. But what matters most is does your salesperson know? To help ensure you don't have to repeat the same points in the next sales coaching discussion with this rep, you want to help them think about how they can apply the broader lessons you're trying to convey.

Becoming a better sales coach

There are two key purposes for this coaching conversation. One, obviously, is to better qualify forecasted deals and help the salesperson strategize on getting an opportunity back on track. The 2nd purpose is to develop your rep to do a better job of selling the next time.

The Pareto Principle - How It Can Help in Your Business

 For businesses looking to grow, the general statement "We need to find more customers" can become a precarious sales directive. What businesses need to strive for are the right customers, ones that drive profitability upward. This brings us to the following question; who are these "right" customers? Applying the Pareto Principle, also known as the 80/20 Rule, you can easily define who the right customers are for your business.

The business-management consultant Joseph Juran made the assertion in 1941 that 80% of the effects come from 20% of the causes. Juran dubbed the principle "Pareto's Principle" after the Italian economist Vilfredo Pareto whom in 1906 observed that 80% of the land in Italy was owned by 20% of the population.

While the Pareto Principle has seen a few decades pass since its inception, the theory behind the principle is timeless. Some business examples of the Pareto Principle are:

- 80% of your profits come from 20% of your key customers, 

- 80% of your sales come from 20% of your key products or services, 

- 80% of your defects come from 20% of your products.

A Pareto analysis will underscore the market's perception of the business by identifying the key products or customer demographics. Through the actions of your customers, the Pareto Principle will help you to refine the business' model to further satisfy the market. The influence of the Pareto Principle within the business will appear in the tactical planning for sales and marketing, departmental staffing, product or service design and inventory allocation.

How can this simple principle help my business? Focusing upon key customers provides reductions in transaction costs and operational complexity. Marketing programs can be cost effectively scaled to reach potential customers of similar makeup or demographics as your key customers. As the number of transactions and operational complexity decreases, an opportunity will present itself to reallocate staff to maximize their contributions. Determining the key products, excluding complimentary offerings, provides an opportunity to simplify services and reduce product varieties. Reduction in product or service variety will allow narrower inventories resulting in better cash flows.

What happens to the Customers we discourage over time? With any luck these ex-customers will gravitate toward the competition, increasing their lead time and costs.

Operational complexity is a businesses' worst enemy. Not only is complexity challenging for the employees, complexity can quickly become frustrating for customers. The Pareto Principle will help identify opportunities to simplify and allow the business to truly focus upon the needs of the customer!

Are Managers Using the Wrong Incentives With Their Salespeople

 The way to improve performance, increase productivity and encourage excellence is to reward the good and punish the bad. This is the assumption that too many organisations have based their decisions on throughout the last century and in the first decade and a half of this century.

Sometimes this carrot and stick approach works but many times it doesn't. So what do you need to do, raise the rewards and get tougher on the punishments?

As I write this, I have in mind two sections of industry that use this almost to an extreme. One is the new homes market, the other is the motor vehicle trade. A lot gets written about the motor vehicle trade and the pressure put on salespeople to meet their quotas but far less is said about people management in the new homes sector so I'll use them as my example.

It amazes me that people with the skills and knowledge to build beautiful new homes are such pathetically poor managers of people who have clearly never heard of the '3 Dimensions of Job Satisfaction'. I'm sure there are exceptions, but they are definitely in the minority and the industry has a culture that breeds fear of failure and survival of the fittest amongst its salesforce. This leaves little room for a customer focussed approach where the joy of helping the customer select the right house for them that is in the right location at the right price is in itself fulfilment.

They reward the high performers with excellent commissions, huge bonuses, overseas trips and sales awards. For those who fail to meet their targets, who are viewed as 'burning leads', as being 'poor closers' there is the threat of dismissal. So, what happens? Fear sets in. It affects their confidence, clouds their thinking, tempts them to take shortcuts and they end up being fired... even though they may have been the ones picking up the awards and bonuses six months before.

The strange thing is that these companies design and construct great houses, using excellent systems and wouldn't dream of taking shortcuts in the building process. Yet their assumptions about how to motivate and incentivise people make life difficult for them as managers, create a fearful work culture and cause ongoing problems.

It's time that managers questioned their assumptions about how to motivate people and looked at alternative approaches. Until managers learn to be a coach reinforcing the positive behaviours with praise and helping their team to work through problems, they will constantly be under pressure and will infect their sales team with a fear of failure.