I made a LinkedIn Poll about Revenue Operations best practices that are impossible to find. (It's ok to laugh at the number of votes...). By far the winner was Forecasting, followed by Tech Stacks, and it made me think... what did I really know?
Starting a career as a salesperson no one had ever demonstrated solid forecasting to me, and it seemed like the VP of Sales was following a scent or had a 6th sense or something. Worse, they were often wrong.
So... I researched and researched until the material just seemed to be repeating itself. Here are the Top 5 things I learned. Note that this assumes some previous knowledge about forecasting (didn't want to make this a 5-part series), if you don't have context google it.
I thought I’d introduce Dave Kellogg who reframes forecasting magnificently simply. In his blog post, he writes about the 3 numbers that a VP of Sales is responsible for delivering to the board (Forecast, Best Case, and Worst Case) through a wonderful imaginary conversation. In it, he reframes these 3 figures into (assuming quarterly forecasts):
Forecast – a number you will miss only once every 2.5 years
Best Case – a number you will beat once every 1.25 years.
Worst Case – a number you will miss only once every 5 years
In order for a VP of Sales to be able to provide this level of confidence they will need to build an ecosystem for their Sales and Operations teams and (depending on the size of the organization) could stretch well beyond their ability to personally manage the process. For that reason, automating and having a cohesive strategy across the organization is the first step.
In short, the goal of forecasting is to develop a process and system which together produce accurate predictions of sales pipeline while representing risk and weight. The secondary goal is to use that system to manage, train, and inspire your team.
Agreed Upon Strategy Best Practices
Bottom Up should Meet the Top Down. The “Bottom Up” qualitative approach is the calculation of the predicted forecast based on the individual deals in the pipeline. Sales Reps are responsible for managing and communicating the likelihood of specific deals closing based and in combination with layers of management those numbers are summed to provide a forecast. “Top Down” refers to the determining of a Market Cap and market penetration goals that the company may have or want. (EX: $200 MM market cap * 10% market penetration means revenue of $20MM.) Where these meet is the balancing act of expectation setting that middle-management (ie VP's of Sales) have to work.
Technology can't solve Process. Nothing Salesforce can do to help you if you can't get off the ground without the following done well.
Align Key KPI’s across Marketing, Sales, Success, and Finance
Standardize the Sales Process
Standardize the Forecasting Process
Manage to the Process
If you don’t have historical data… don’t buy a tool. The number of tools (known as Quantitative “Casual” strategies) out there are incredible. These tools use Leading Indicators and Econometric Modeling to predict the success of your pipeline. They look SOOOO cool, but don’t buy it unless you have the historical data to back it up. If you recently changed your sales process, you don’t have good salesforce adoption, or for another reason have bad data, these tools won’t help much. Additionally, a tool like this is often a cover-up for management being ineffective, especially for small teams. That said, if you have have the right data - here is a recent article on the best tools.
Agreed Upon CRM Best Practices
By using best practices with Forecasting Categories, Probability %, Reporting Snapshots and a strict process, you can get very far. This includes looking at business segments, deal types, forecast type, etc… But stays away from the predictive analysis seen in platforms advertised in airports and metro stations….
Separate your Stage and Forecast Picklist Values – The stage represents where the prospect is in the buying process while the Forecast allows reps to give their prediction of where the deal will land. If you combine the two, you aren't producing a real forecast, just a projection of close percentages without the allowance for a late stage deal to be best case.
Lock Down the Probability Field – These will eventually be based on the close rates at certain stage values. The Forecast Category will allow for user input, don’t allow another option for reps to change it to “23%...”
Create reports for different user groups – Here is a great Linkedin Post that goes into the importance of allowing your reporting to be flexible enough for every contributor to the forecast (Sales Engineers, Product Managers, AE’s, SDR’s, VP’s, etc…)
Use Salesforce Snapshots – Bill Binch wrote a terrific article about using 3rd day of Quarter Pipeline against the ending results. Use Snapshots to capture what is in your pipeline at the beginning of the quarter (3rd day) then compare it to end of quarter results. This will help you to see which deals closed, which got pushed out, and what type of multiple for pipeline coverage is appropriate for your team. This and a lot of the visuals are the functionality a tool might produce if it is a good idea for you.
Running a Forecasting Meeting is an Art
There is a reason why it seemed like a mystic... it's hard and has many dimensions, but good leaders do it. Your goal as a VP of Sales is to get accuracy of your forecast, but it crosses over with the ability to grow Sales People.
With sales reps, it is important to establish up front that the ultimate purpose of the forecast review meeting is to improve accuracy. If a sales rep misses his quota, but hits his forecast dead on, that’s a better end result than if the forecast was wrong altogether. ~ Ori Yankelev (2012)
He goes into talking about other helpful tips about running forecasting meetings and it's a really good read. His steps are Prepare, Inspect, Invite, Management, and Frequency.
You are in the drivers seat
When you have the right data, there is so much you can do. Gary Smith breaks down "How to Plug a Leaking Funnel" specifically with a ton of awesome strategies once you know where to plug the hole. If you're doing it right, it means that every answer comes with about two more questions and it's ever expanding!
In all the consulting projects I've done, it's maybe twice been the case that the company had a refined process and not the technology. Forecasting requires tenacity and commitment from a large team of individuals with their own incentives, and no one likes to lose a deal... At The Sales Nerd, we drive to deliver amazing Salesforce+ ecosystems that take into mind that process comes before automation. If you have a project that could be a fit, always feel free to reach out.