Forecasting is critical to any sales organization. See our blog post on how it affects your credibility.
Sales forecasting
Forecasting is related to funnel management. Each opportunity in the funnel should have some probability of success associated with it. For each opportunity do the following calculation:
Probability x Revenue of the Opportunity = Forecasted Revenue. Then the total within each person’s forecasted revenue becomes that person’s forecast. Sum all the sales reps and you have the group’s forecast.
There are two key problems and issues with forecasting.
- You should never allow each sales rep to assess the probability, you need a standardized way to do this. And, it IS NOT based upon your sales process. Instead it’s based upon your customer’s buying process and how that is mapped to your sales process.
- The individual stages in the sales funnel need to be very well defined with entrance and exit requirements. Never leave it up to the rep to determine if an opportunity should exit one stage and enter another.
These are simple concepts, but very difficult to define. We’ve worked with many companies on forecasting and have been very successful in improving forecasting dramatically. In addition to our own experience and consulting we also use a combination of Miller Heiman’s Strategic Selling® methodology and Funnel Scorecard® to help fix this problem.