1. Sales Forecast BS Detector
5 Simple Questions to Assess the Accuracy of Your Forecast
1. What is the funnel Size?
If you’ve committed to a $10M revenue number this quarter and the funnel has
$15M in it, the size of your funnel is likely too small to deliver the goal. Likewise,
look for total number of deals. If a handful of deals represent a large portion of the
funnel, inspect closely. Your forecast accuracy is on shaky ground.
2. What is the funnel Shape?
Where are the deals in the funnel? If you have a 5 stage sales process and 80% of the funnel
is in phases 1 and 2, your goal is unlikely to be met. If much of the funnel is in the bottom,
this may be an indicator of making the number this quarter. Be wary of next quarter’s
forecast.
3. What is the funnel Mix?
Are most of the deals in the funnel new logo accounts? Cross/up sells? Your success
probability is exponentially higher inside existing accounts. It’s important to look at the mix
of the funnel relative to the probability of hitting the goal. A high concentration of new logo
accounts brings your forecast accuracy into question.
4. Are conversion rates at the top, middle and bottom of your funnel based on Empirical
Data or Gut Feel?
How are the projected close rates determined in your sales process stages? Are they based
on historically accurate measurements or did sales leadership use subjective placeholders?
For example, phase 1 is 10% change of winning. Phase 2 is 25%. Phase 3 is 50% and so on.
Not using your own data makes your forecast accuracy almost impossible.
5. Are the projected close rates based on Empirical Data or Gut Feel?
When you ask sales what they are likely to close and by when, how do they answer the
question? If a rep tells you the deal will close next month and you know the normal cycle
length should take 4 months, you have an issue on your hands. Also, consider who is
delivering the news. A rep who has a history of delivering, or someone who consistently
overpromises?
Blog Post Resource: http://www.salesbenchmarkindex.com/bid/93507/Why-Most-Sales-Forecasts-Are-Inaccurate