forecasting is tricky because most B2B companies lack the large sales volumes
required by statistical forecasting techniques.
consequence, B2B companies that care about their forecasts usually choose one
of two methods with notable
you mitigate the drawbacks of these forecasting techniques?
documented sales process
methods require that your opportunities be in the “right” pipeline stage, i.e.
the stage that accurately reflects how advanced they are in your sales process.
a well documented sales process is key. Sales reps must understand where they
are and what they should do based on their prospect’s buying process. To help
them, I recommend a simple, yet effective (and free) application: Sales Coach
. For each stage of
your sales process, Sales Coach lets you define the required milestones and
specify the available collaterals. Sales Coach then displays this information
directly in your opportunities.
Create validation rules for advancing opportunities
from one pipeline stage to the next. While such validation rules are stricter
than Sales Coach guidance, they can be quite cumbersome for sales reps handling
dozens of opportunities. You don’t want them to degrade data quality, with
sales reps omitting to update their pipeline because of “fastidious” clicks. So
we recommend that validation rules be used sparingly, for really important
requirements, like contractual documentation or compliance procedures.
Reality checks for closing dates
techniques are also exposed to bad closing dates. This is a serious issue: respondents to CSO
Insights’ 2011 Sales Performance Optimization Survey
typically indicated that fewer than half their sales opportunities closed in
the time frame predicted. We all know what “slippage” does to sales
like to suggest 3 “reality checks” for closing dates, which should improve your
sales forecasts significantly.
outdated closing dates down. Our
research shows that at any given time, 30% of the opportunities in B2B
sales pipelines have outdated closing dates. This is clearly unacceptable.
Standard Sales Cloud reports and alerts will help you eradicate those
stagnating opportunities early on. Both
SalesClic research and Sales Benchmark Index research shows that on
average, it takes twice as long to lose an opportunity than to win an
opportunity. The reason is simple: the opportunities that are
eventually lost tend to stagnate a lot before that, which is why you must
spot them as early as possible in your pipeline. Doing this
“intelligently” (i.e. based on the analysis of your historical data) is
quite complex, since it implies measuring and interpreting your sales
velocity in real time. But selected applications on the AppExchange can
pedal” from the closing dates. You know
your sales process: the requirements for each pipeline stage and the time
they usually take. For a given opportunity, start from your closing date
and back-pedal through your sales process to the current stage of that
opportunity. Do you arrive at today’s date? That is usually an effective
3. Closing probabilities: beware decomposition
categories are immune to bad closing probabilities, but the weighted pipeline
is very exposed. Copious research in behavioral economics has established that
humans are bad at assessing probabilities, which regardless of the politics
involved explains why weighted sales pipelines are frequently biased.
correction, some sales consultants recommend that you decompose the closing
probability into (i) the probability that your prospect will complete the
corresponding project, and (ii) the (conditional) probability that you will be
the preferred supplier for this project:
= P(project) x P(supplier)
I am not
convinced, for reasons that are detailed in this article
. I don’t necessarily
recommend that you drop decomposed closing probabilities altogether if you are
using them (as a “forecast accounting” tool they can be interesting), but at a
minimum that you combine them with alternative, ideally data-based methods.
Your sales database is a gold mine
of which: your sales database is a forecasting gold mine. True, as a B2B
company you probably don’t have enough closes per year to feed statistical
forecasting models (you would need thousands). But:
on “pipeline dynamics” (e.g. transitions from one stage to another,
variations in amounts and closing dates), not just closes, increases the
quantity of data available for forecasting significantly.
are very effective forecasting methods that apply to the B2B sales process
and don’t require as much data as “traditional” statistics. They include pipeline simulations
and algorithmic modeling.
Digging into your sales database that way is quite technical,
but here again selected AppExchange applications can help. It is worth trying
them out - think of the value to your team of a 35-50% increase in sales