The Ultimate Guide to Sales Forecasting

Forecasting is one of the more difficult tasks for sales leaders and sales managers. In times of uncertainty or instability, it can be even more challenging to predict the future. If you listen to companies report their results on CNBC, you will invariably hear large companies report that the economy has slowed deals. Add to this the 10 sales challenges we face, and forecasting is even more difficult.

For most sales leaders and managers, forecasting is about as reliable as asking a psychic, consulting tarot cards, or examining the entrails of a chicken. One sales manager I know never misses his forecast. His secret? Only projecting the deals his team has already won. You are not likely to use this strategy, which isn’t really forecasting anyway. There are, however, questions that can help you determine whether a prospective client will sign a contract by the end of a period.

By using these questions, you can get a better handle on whether to forecast a deal. Individually, these questions are helpful, but collectively, they are a powerful method for improving your forecasting.

Sales Math

Before we explore the questions that will improve your sales forecasts, we need to look at sales math. The sales opportunity stages and the percentages you use in your CRM are not very helpful. Here is an example that shows why you cannot trust these percentages. Your salesperson is at the negotiation stage of your sales process. Your CRM suggests you have a 70 percent chance of winning that deal. But your salesperson tells you the task force is considering two of your competitors. Your chances are now 33 percent.

Using the average percentage of the entire sales force to forecast the odds of any individual salesperson’s deal ensures you will be incorrect. You are better off doing the math for everyone on your team, and using data that is specific to each salesperson. This will improve your ability to forecast their sales, while also helping you coach them to improve their close rates.

Here are some ways to improve your pipeline presentation when sharing your forecast.

Questions about Change

There are two main types of questions about change to ask when predicting whether a deal will close. The first type seeks to determine whether the prospective client is compelled to change. The second type of question aims to understand the level of their commitment to making the necessary changes.

• Compelled to change: There is no reason to forecast a deal if the salesperson can't tell you why the client needs to change. The greater the detail about the need to change and how poor results are harming the prospective client's business, the more evidence the opportunity is real.
• Committed to change: There are sales conversations where a senior leader on the client’s side tells the salesperson they will make the change they need. In The Lost Art of Closing, I suggested salespeople ask the client directly if they are committed to change. You don't want to go through the whole sales process only to find they were exploring options but not ready to actually do the necessary work. A commitment to change is a positive indicator for closing a deal.

These two questions are helpful, but they don't give you nearly enough information to forecast a deal.

Questions about People

Even when a prospective client is compelled to change and has demonstrated their commitment, it’s important to understand the viewpoints of the people involved. There are several types of questions about the people and dynamics that a salesperson should be able to answer to help with forecasting.

• Stakeholders: There is little doubt your salesperson has a sponsor or a coach, but it is less certain they have an executive who is aware of and interested in the change initiative. You want to ask who is going to greenlight a change initiative. If the salesperson doesn't know who will approve the deal, it's a strike against adding it to your sales forecast.
• Willingness to engage: In small deals, a salesperson might have no trouble accessing the people they need to win. As deals get larger, there is reason to be concerned if the salesperson has not met with or encountered people outside the department leading the change initiative. When you are reasonably certain a deal will touch different areas of the business, postpone a forecast until you are certain your sales rep has access to the stakeholders.
• Client effort: This is the most underrated factor on this list. A contact working to move the opportunity inside their company is evidence that the client will buy. The more the salesperson can recognize the client is working for them specifically, the more strongly you should forecast the deal. A contact who isn't doing the work should make you less willing to include it in your forecast commitments.

Fit and Process Questions

When forecasting a deal, consider how well your offering fits with the prospective client’s needs, and whether your process can align well with their process and timeline. There are three angles to use when examining these aspects.

• Delivery model: Many salespeople believe their offering is superior to that of the competition. This can make it difficult for them to face the reality that sometimes their solution isn't a good fit. Here's an example: The prospective client is a low-priced provider in their industry. Because this is true, they need a partner who can help them lower their costs. Your solution is way better, but your delivery model conflicts with your client’s business model. You may have to dig deeper to see if this client will pay more to lower their costs. It's rare that I would forecast such a deal.
• Buying process: When asked about the client's process, a salesperson who doesn't know what the client needs in order to buy may not be well positioned to determine the client's timeline. Salespeople don't like asking these questions because it can feel self-oriented. It's difficult to forecast a deal without knowing what the buyer needs to do to get their initiative done.
• Client's go-live date: Of the factors you can consider, this one seems to help you make a go or no-go on forecasting a deal. Your CRM is full of closing dates that fall at the end of a week or a quarter. This means the salesperson has no idea when the deal will close. If the salesperson says the client will go live on Tuesday the 17th, you can have strong confidence in forecasting.

The Ultimate Guide to Sales Forecasting

Sales forecasting is important, especially when your company needs to ensure they have the bandwidth to take care of their new clients. It's also important for making certain what you are doing is going to produce the results necessary to reach the company’s goals. These forecasting conversations can help your team reach their sales quotas by teaching them how to improve their sales approach.

Use this guide to ask the questions that will help you make a good decision. To make this guide more valuable, add the questions you need to be confident with your forecast.