How to Fix Your Forecasting

Since scientific forecasting isn't going to happen inside most firms, what's the best way to turn the forecasting process into something useful? It's not impossible, but it requires some extra work on the part of sales management. Here are the four steps:

1. Redefine your sales process in terms of customer-centric milestones. The source of most errors in forecasting is a sales process that tracks the activities that sales reps do, rather than the actions that custome...rs take. A "vendor-centric" sale process encourages reps and managers alike to think of the forecast as something that reflects the outcome of sales activities, rather than predicting the behavior of the customer base. For example, when predicting how many sales are going to close within the next month, it's not particularly useful to know that your reps made 57 in-person sales calls. What's useful is knowing how many customers made a "verbal acceptance" and the average percentage of such customers that actually sign a contract.
2. Track those milestones in your CRM system. Once you've got a customer-focused sales process, use your CRM system to track the progress of each rep. To paraphrase the excellent advice in one of the comments to our previous post, check progress in the system daily and meet with each salesperson weekly to review that progress as it's reflected in the CRM system. Provide coaching as necessary to improve the ability of each sales rep to influence the customer to move sales to subsequent milestones in the sales process. With solid CRM data based upon customer-focused milestones, it's relatively easy to calculate, based upon historical performance how many customers will move to the final stage of the sales process within a given period of time.
3. Decouple forecasting from the sales quota system. As long as sales managers try to use forecasting as a motivation tool, it will remain inaccurate. There's nothing wrong with having sales quotas, but the time to talk about those quotas and compensation isn't when you're trying to come up with a meaningful projections for investors and the rest of the company. The easiest way to do this is to revisit quotas on a monthly basis so that they're not discussed in the same context as the forecast. This takes some mental discipline on the part of the sales manager, who must resist the temptation to conflate the two activities. But they need to be separate in order to keep the game-playing and politics out of the forecast.
4. Convince top management to reward, rather than penalize, forecasting accuracy. In many companies, top management beats up any sales manager who walks in with a forecast that's not what top management would prefer it to be. While there's no question that top management should consider replacing a sales manager and sales team that can't consistently deliver what's needed to make the company successful, that's not a decision that should be made during a forecasting exercise. The forecasting process needs to reflect reality, not wishful thinking, and shooting the messenger is a bad way to get a picture of reality. So top management has to take a "just the facts" attitude when dealing with forecasts and consider issues about sales strategy and personnel deployment separately.