The Problem with Most Sales Forecasting… and The Underlying Issue Causing It

Posted by Josh Turner in B2B Lead Generation & Sales Insights

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In today's blog post we look at the MAJOR disconnect between sales forecasts and actual results. Does the problem tie back to misalignment between sales and marketing teams?

We all know salespeople are often overly optimistic about their projections. You kinda have to be if you’re in sales. But the problem may be larger than you originally thought.

Research shows that sales predictions and forecasts are right only 28% of the time.

For comparison's sake a 5-day weather forecast is still right 90% of the time. 😉

This week’s post will dive deeper into the research about sales forecasts (or lack of reliable forecasts) and how you can use this information to make better budgeting and marketing decisions in your business.

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Why Sales Forecasting Should Matter to You

First of all, why do we even care about sales forecasts? In one word: planning.

If you can accurately predict how many sales you can close every month or every quarter, you can plan ahead to make sure you have the budget, the supply, and the team you need in order to close and service those new sales.

On the flipside it should give you insight into if and when it’s time to investigate new sources of lead generation for your sales team. If your forecasts look low, it’s time to make a change.

Business decisions are made by looking at previous results and upcoming projections based on that history. If you have wholly inaccurate projections, it will hinder your ability to make good decisions moving forward.

Let’s start by taking a look at the simple definition of sales forecasting:

“Predicting how future sales activities will result.”

A prediction of how many deals will close in a given time period. Makes sense, right?

Any marketer or business owner should be able to tell you why sales forecasting is important.

It’s critical for the business to have an idea of what kind of revenue you can expect from the activities or campaigns you’ve run to generate those opportunities. Most of us probably agree with that statement and base their decisions off of current forecasts.

But, if only 28% of closed deals are forecasted accurately, how successful can our decision-making be if the data that led to those decisions is inaccurate?

Why does this happen?

A wide variety of reasons likely contribute to this miscalculation.

From overly-optimistic sales reps, to poor CRM note-taking and reporting, a lack of accountability to forecasting, and notably a disconnect between the marketing funnel and sales pipeline.

Helpful Tip

Find opportunities to align your sales team and their lead gen efforts with the long-term marketing goals of the organization. That alignment between short-term gains and long-term wins is gain a stronger foothold in your market and provide your sales team with the proper structure to better forecast and build their pipeline.

Is It Really a Sales Pipeline Problem?

It certainly can be.

And to solve it you need to make sure your marketing and sales are on the same page.

Marketing needs to consider what kind of leads are filling up the sales pipeline to begin with. If they are stuffing the pipeline with unqualified leads in the first place to make their results look stronger, it doesn’t contribute to the overall goal of the organization and can lead to inaccurate forecasting by their sales team.

At LinkedSelling, we only consider a lead a true “lead” if the person is qualified and agrees to an appointment, but not every department out there holds their leads to that standard.

It’s not uncommon for teams to allow leads in their pipeline that only take up space and energy from the sales reps trying to contact, build a relationship with, book an appointment and close a deal with someone who wasn’t an ideal prospect in the first place.

If you count only qualified prospects and leads, your forecasts should start improving by giving your sales team a better starting point to prioritize their time and energy.

So, first you need to make sure both Marketing and Sales are on the same page regarding what constitutes a quality lead.

Next, you need to make sure that Sales has an accurate understanding of the marketing funnel and relationship that has been created between their leads and your company.

Too many outbound sales organizations disregard relationship-building, positioning and prospecting in favor of quick wins.

It makes sense, right?

Sales reps are often judged on a ‘what have you done for me lately?’ approach which leads to them prioritizing short-term wins.

But if you can align both your marketing and sales teams on the top-of-funnel and bottom-of-funnel initiatives, it will lead to more accurate reporting and better opportunities because both departments will see how their short-term actions affect the larger organizational goals. By involving them in seeing how their short-term actions result in long-term wins can reduce some of the pressure to project new sales this month that are more likely to come down the line.

Now with all that said, the forecast reporting is one piece of the puzzle. It helps you make decisions and allocate budget appropriately, but without a full pipeline of targeted, quality leads the juice isn’t worth the squeeze.

You need to first make sure your reps are full with ideal opportunities. The number one factor to improving your sales forecasting is to provide enough opportunities to allow your sales reps the information they need to forecast more accurately.

Without enough chances to create a baseline, your sales team is just guessing.

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