Accurate Sales Forecasts and Other CRM Fantasies

Every company needs a sales forecast, but generating sound growth projections is devilishly hard, and accuracy depends on rethinking old forecasting processes.

By David Taber
Thu, February 16, 2012

CIO — Some companies are in the enviable position of having a sales backlog, and in many parts of the economy demand is starting to heat up. But prosperity has its own problems, including inventory shortages, guessing wrong on what the hot items will be, and excess work in progress that makes Wall Street cranky.

If forecasting itself were easy, then economists would all be rich and weathermen sages. In other words, it ain't. One root cause: Since careers and stock valuations depend on forecasting and revenue management, the process can be highly political. There's a lot of emotionally charged data. As sales execs can be quite adept at, ahem, managing the flow of information, nobody — not even the CEO—knows the whole story of the pipeline. This can be dangerous. (And good luck with Sarbanes-Oxley compliance!)

At their best, SFA/CRM systems give a comprehensive view of the pipeline, as well as detailed drill-downs on the state of play for any specific deal. Unfortunately, few CRM customers can really depend on (or even use) the forecast that the system produces. Most of the time, executives must second-guess the CRM data, making judgment calls that may not be consistent week to week and are rarely recorded anywhere. Worse, everyone's first reflex is to call the rep if they need to find out what's really going on with any account. As a result, the CRM data is seldom authoritative.

What Are the Steps to Better Revenue Visibility?

Nobody will put the time into good SFA/CRM data unless there's a personal payoff for them. So you need to make the system a key tool that's integral to how the sales team actually operates. Artificial incentives won't help here—you need to put the CRM in the critical path for sales cycles. Identify resources that reps need (travel approval, loaner machines, quotes, available-to-promise dates, etc.) and make them available only via requests through the CRM.

Commissions drive behavior. Require that all deals be in the CRM system for at least a third of the length of the sales cycle before they become commissionable. Deals that just pop in three days before the close date may be welcome news, but they're bad for the organization. Make them bad for the reps as well.

Any sales methodology—Miller-Heiman, Sandler, SPIN, MEDDIC; name your favorite—will help forecasting accuracy. But don't get hung up on dogma or process. The key issue is having unambiguous definitions in your sales cycle, and building discipline and consistent behavior across your sales team. That's what improves the "signal to noise ratio" in forecast data.

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