I have some bad news for you: Your sales reps are lying to you.
And, ok, I have even more bad news for you: It’s your fault.
Why are your reps lying to you? And how is it your fault? It starts with how you ask them to predict which opportunities they’ll close each month.
Let me take a guess: Every week or so, you sit down with your reps, go through the open opportunities in their pipeline and ask them which deals they expect to close this month. Your reps go over the notes they’ve taken for each opportunity and recall their most recent conversations. Based on this information, they essentially give a thumbs up or a thumbs down on each opportunity. And this is how you build your sales forecast.
This is standard sales practice, and nearly every sales team uses some version of it, but it’s exactly the wrong way to go about sales forecasting, and it could be costing your company a lot of money, damaging your sales team’s reputation, and even jeopardizing your job.
What’s the solution? Stop listening to your gut and start relying on your historical data.
Your Reps Don’t Know Which Deals They’ll Close
The job of a sales rep is to approach every opportunity as if they’re going to win it. Like soldiers on the front line, closing reps are trained to be aggressive, optimistic and confident. This helps them passionately work every opportunity instead of giving up on opportunities they’re on the fence about.
The downside is that it gives them happy ears: they believe they’ll close many more deals than they actually will. Then, when you meet with them to discuss which of their open opportunities will close, they’re all rosy and bullish.
Or it’s just the opposite.
Not wanting to come up short of their quota, your reps will sandbag and hem and haw about the opportunities in their pipelines. “Oh that one probably won’t close,” they’ll tell you. Then, at the end of the quarter, when the deal comes in, it’s a welcome surprise. And everyone’s happy. Especially you, their manager.
But everyone shouldn’t be happy. Your goal is to forecast accurately, not to overshoot implausibly low expectations.
Either way, your reps’ thumbs-up-or-thumbs-down should not be how you make your forecasts. In the long run, this strategy will lead to unpredictable quarters and forecasts that are wildly off.
So what’s the solution?
Using Historical Data for a Data-Driven Forecast
The solution is to rely on your actual results from the past to help you predict which opportunities will actually close.
What type of data?
- Opportunity size
- Opportunity stage
- Opportunity Age
- Rep-specific win rate
- Close date pushes
Together, these data points will give you a reliable metric for evaluating the individual open opportunities in your pipeline. But the key is that it doesn’t just give a binary “yes” or “no” answer, but instead a much more useful indication of how likely it is to close-won and, relatedly, how much revenue you can expect it to contribute to your bookings total. In aggregate, these “expected contributions” combine to give you a much more accurate bookings forecast than simply adding up the opportunities that your reps ‒ tainted by happy ears, sandbagging tendencies, or just a lack of correct data and information ‒ feel like they’ll close.
“How can I start incorporating data-driven forecasts at my own business?”
Even if you know and understand all of the information explained above, you may still be wondering exactly how you can start using data-driven forecasts for your own sales team.
Luckily, we’re here to help.
We just put together a comprehensive eBook on building a data-driven sales forecast for your own sales team. We talked to a lot of sales leaders to come up with this eBook, so we’re confident that it will be a really valuable resource for sales managers and their sales teams.
And best of all? It’s FREE.
Download the eBook here and let us know if it helped you transform your forecasts.
