With Q4 fast approaching, the sales forecast takes on an even more important role. It is imperative that the your business finishes out Q3 strong before setting itself up for an even bigger and more successful Q4. This is a good time to hold a great sales forecasting meeting to accurately predict what the upcoming reporting period, Q4, is slated to look like.
(For more detailed information about sales forecasting, check out our FREE eBook: The Ultimate Guide to Sales Forecasting.)
Before starting any sales forecasting meeting, be it on a smaller-scale with weekly meetings or, in this case, for the entire upcoming quarter, sales managers must be aware of key sales metrics. For the company as a whole, they need to know 4 averages: the average sales cycle on winning deals, the average sales cycle on losing deals, the average deal size and the average conversion rate from each stage through to closed-won.
Additionally, sales managers should be aware of the key sales performance metrics for each of their individual reps in primary performance areas. These sales performance metrics are centered around pipeline (open pipeline, quota gaps), deal averages (sales cycle and deal size), sales funnel (historical conversion rates at each stage) and deal analysis (historical opportunity diagnosis accuracy). With all this data and information at hand, the sales manager will be better prepared to lead a great quarterly sales forecasting meeting.
As you head into the last quarter of the year, take stock of all the opportunities in your current sales pipeline that are forecast to close in the next three months. During this meeting, you should inspect each deal to understand whether it truly has a good probability of landing during this sales cycle.
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Part of this deal inspection process should focus on purging stagnant opportunities – after all, a sales pipeline that is cluttered with a bunch of opportunities that aren’t going to close will result in a more pessimistic sales forecast. Look at the recent activity on these opportunities, while looking out for other sales forecast killers such as negative velocity and average deal size.
Average deal size is a key metric to focus on during your sales forecasting meeting. Opportunities that are three times greater than your average should be flagged and treated with differently. If your pipeline is largely populated by a recent influx of opportunities that are significantly greater than your typical average deal size, perhaps your overall optimism for the quarter should be tempered slightly.
Finally, it is time to delve into your sales funnel and examine your historical conversion rates at each stage. Successful sales managers go beyond estimating how likely an opportunity is to close in a stage – understanding their historical win rate in each sales stage (for both the entire team and each individual rep) can lead to a much more accurate sales forecast. Find out if your historical conversion rates have changed significantly (for better or worse) over the past quarter. Additionally, this is a prime opportunity to identify weaknesses in the sales processes of any of your individual reps and for you to help coach reps to the finish line on their middle-of-the-funnel opportunities.
The sales forecasting meeting right before the end of the quarter is a crucial one – after all, sales managers need to set and manage expectations while planning and budgeting in order to finish the year strong. Make sure you have information on the right sales metrics leading up to the Q4 sales forecasting meeting. Be diligent and analytical in studying the information and scrutinize every opportunity, especially ones that are flagged, to determine the likelihood of them closing or not.
A data-driven sales forecast isn’t a crystal ball, but when executed correctly, with the correct sales metrics and a well-run sales forecasting meeting, it can be an extremely powerful and accurate asset in taking you strongly across the finish line.[contentblock id=18 img=html.png]