Sales forecasting is an age-old practice, but one that has evolved with an odd lack of urgency compared to other business imperatives, such as customer relations.
You would think that something as important and time-consuming as forecasting your sales would be given more attention and technology, especially given that most sales forecasts are flat-out wrong. There’s nothing like telling your CEO a week before the quarter closes that your projected $1 million in quarterly sales is going to be more like half a million, or $250,000.
Even though there are tools and techniques out there for making your sales forecasts accurate, a lot of sales operations managers continue to make the same mistakes over and over.
Why sales forecasting doesn’t work
Your sales pipeline always looks way rosier in the eyes of your sales reps, who have a natural inclination to be overly optimistic about their chances. After all—it’s this hope and optimism that keeps them going, no matter how many disappointments or setbacks come their way.
But it’s this very trait, which makes them great sales reps, that also makes it hard for you to depend on them for accurate forecasting data.
While there are ways around this issue, most sales managers listen a little too closely to their reps’ assessment of the pipeline, and end up going on an overly-optimistic picture of their upcoming sales.
2. Lack of transparency
Far too many sales teams use CRM systems that don’t provide the transparency or controls you need to make accurate forecasts.
For example, a sales rep just informed that an opportunity is falling through could choose to simply move the deal’s closing date up a few months on the CRM instead of marking the deal as dead. The rep may be doing this either intentionally — that is, to purposely make himself look better — or unintentionally — that is, because he truly believes he can still close the deal.
Either way you are left with a forecasting inaccuracy.
This lack of accountability and transparency of pipeline and sales data reporting wreaks havoc on forecasts.
3. Bad data
This is one of the most easily fixed sales forecasting issues, which makes its continued existence all the more egregious and puzzling.
Bad data from CRM systems is rampant, and that’s because most sales reps don’t want to spend their time updating a CRM — they want to be talking to potential new customers.
This leads to data that is old, inaccurate, or just plain non-existent, and when your forecasts are based on bad data, you know very well what happens.
The good news is, it really doesn’t have to be like this. There are solutions and best practices out there to turn sales forecasting from an act of futility into an act of reality and even value-building.