Sales performance measurement: accurate forecasting, not guesswork
Less than one in two forecast deals actually close as anticipated. Learn how measuring performance can make your sales forecasts more accurate.
Published August 1, 2017
Last updated July 21, 2020
Learning to accurately forecast pipelines is an important part of sales management training, as it can allow businesses to predict future performance and make important decisions ahead of time. However, the problem many organizations encounter is that their forecasts are not as accurate as they should be, often relying on guesswork instead.
In fact, the CSO Insights 2016 Sales Best Practice Study shows that the average win rate for forecast deals is 45.8 percent. In other words, less than one in two forecast deals actually close as anticipated. Here, we explore how performance measurements can make your forecasts more accurate.
Measuring sales activities
The activities of your sales team are all measurable and manageable. Moreover, they have a cause-and-effect relationship with things like overall sales performance and revenue. Therefore, to be able to produce accurate forecasts or projections, managing individual sales activities is absolutely essential.
If you measure sales activities, you should be able to find out, on average:
- How many phone calls it takes to get a prospect to engage with your business
- How many of those people reach the point where a proposal is tabled
- How many of all tabled proposals end in a deal
This information can then be used to make team projections.
Furthermore, when such activities are measured, you can use sales management techniques to focus on the most crucial ones to achieve success. Indeed, through appropriate training, you can teach sales managers to track the performance of individual reps against averages as well as top performers and coach those who need the most help.
Defining forecasting practices
When it comes to forecasting specific deals in a way that is accurate, rather than based on guesswork, it is essential to clearly define your forecasting metrics and practices. This means:
- Using consistent sales processes
- Avoiding 'hunches'
- Looking at whether potential sales are meeting set criteria to put them in the forecast category
"Don't allow for subjective forecasting," says Donal Daly, author of Account Planning in Salesforce, writing for Altify's Smart Sales Blog. "Implement a sales process across the sales team based on customer verifiable outcomes that indicates whether a deal should be forecasted based on specific evidence."
The key to what Daly says here is that forecasts should be made based on actual evidence. Look at individual deals and test each one against the criteria you have established, in order to see whether it really is an opportunity you can rely on. In many cases, when forecast deals are scrutinized in such a way, they are revealed to be long shots.
In the CSO Insights 2016 Sales Performance Optimization Study Key Trends Analysis, the research division outlines its four levels of sales process:
- Level 1: random process
- Level 2: informal process
- Level 3: formal process
- Level 4: dynamic process
At the highest level, sales reps' use of a sales process is dynamically monitored and fed back to higher-ups. At the same time, the business also continually learns and modifies that process, based on market conditions, etc. The findings show that companies on level 4 enjoy improved win rates on forecast deals.
This helps to highlight the importance of continuously learning. Of course, a business's own history is one of its most invaluable tools for learning as well. In fact, past performance is often one of the best indicators of future performance, as long as changes to processes, conditions, etc. are factored into any projections.