If only you had a time-traveling DeLorean! After your team missed its sales goals last quarter, you’d like to go back in time and knock some sense into your past self. Why did you rely on that unlikely big deal coming through? Why did you assume your sales reps would have unusually great performances last month? Why did you trust that your team could reach a higher goal than ever before?
Unfortunately, you’re not Marty McFly, and there’s no time machine for you to hop into. However, there is a way to forecast your sales results more accurately. Instead of relying on your sale’s rep intuition-based guesses as to whether a deal will close in the coming months, you can use historical sales data to forecast far more accurately. Here’s the metrics you must analyze to get the most accurate sales forecast possible.
Historical Win Rate by Rep
You probably already know your team’s overall win rate, but do you take that data into account in your sales forecast? If your employees win deals at a rate of 31% overall, you should expect only about 31% of the deals in your current sales pipeline to close in the coming quarter. However your sales forecast can be even more accurate.
Drilling down even further, this report shows each of your sales rep’s individual win rates in the past 12 months. Instead of applying the 31% rate to the value of the total sales pipeline, you can get a more accurate sales forecast by using every rep’s win rate to weigh the opportunities in their individual pipelines for next quarter. Instead of relying on the sales reps to tell you their personal feelings or predictions about the opportunity, this data will give you an accurate and – more importantly – objective estimate of the amount each rep will close.
The other factor that often goes awry in sales forecasts is when deals take longer than expected to close, and push to the next quarter – leaving a gap in your forecast. You can account for that variable by looking at your team’s sales cycle as opportunities move through the pipeline. How quickly can your reps close the deal?
This report shows the historical sales cycle for each of your employees, at about 33 days on average. But you can clearly see that Robert has the longest sales cycle by far, so you should not necessarily take his word when he says a newly created opportunity will close in the next week. Instead, you can use objective data to show the deal is unlikely to close within the quarter, and factor that into your forecast.
A Data-Driven Sales Forecast
Using your team’s historical win rate and sales cycle, as well as the value of your current sales pipeline, you can create a sales forecast that very nearly allows you to see into the future. By weighing the forecast with the data, you can see approximately how many deals you can expect to close in the coming quarter.
This report shows your team’s progress so far in blue, matched up against the goal number in grey. The projected revenue based on previous quarters is seen in green. This is how your team has historically performed, based on their win rate and sales cycle. But it also takes into account the pipeline, as seen in purple. By balancing the two metrics, you can see that your sales goal for the quarter is achievable, but challenging for your team.
By using these metrics, you can feel completely comfortable making your sales forecast every quarter. Ignore the reps that tell you they “just know” this deal will close. Apply your sales team’s individual performance KPIs to your total pipeline value and you will create an accurate sales forecast – no time machine required.