One of the biggest challenges to the accuracy of any sales forecasting system lies in accurately predicting the close date. It’s a particular problem this month, at the end of the sales year, because aligning everything necessary to close a bookable order requires a great deal of preparation, and quite a bit of luck.
Wandering close dates are another common challenge, particularly because they rarely seem to wander closer to you, but always seem to prefer to drift off towards the horizon.
Now, I know this is hard. I know that sales people can always be prey to external events. But there are a handful of simple measures that every sales leader could and should put in place to mitigate the problem…
JUSTIFY THE CLOSE DATE
The first is a simple one: add a “close date confidence” field alongside the close date field in the opportunity record, and make it a mandatory requirement. There are only three options that need to be provided:
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- ABSOLUTE [A credible contact within the customer has confirmed they have a genuinely compelling event that will force them to place an order no later than this date, and this is documented elsewhere in the opportunity record]
- LIKELY [A credible contact within the customer has formally confirmed that they expect to be able to place an order no later than this date, we believe this date to be credible, and this is documented elsewhere in the opportunity record]
- HOPEFUL [We are hopeful that an order can be booked by this date, but there is no compelling event, nor has a credible contact within the customer confirmed they hope to place an order by this date]
You must require your sales people to justify their assessment – otherwise (like so many other mandated fields in so many CRM systems) it will simply become a thoughtless tick-boxing exercise.
EXPLAIN ALL CHANGES
Every time the close date changes, you should require your sales person to explain and briefly document the reason – if nothing else because it will force them to think carefully about the new close date, and because you need them to see every change as a learning experience.
TRACK THE NUMBER OF CHANGES
Make sure you keep a log of every time the close date changes (this is really easy to do with a sales analytics solution like the one offered by insightsquared). The more the close date has changed, the less your confidence ought to be in the latest prediction. It’s a proven risk factor, and you cannot afford to ignore it as you sanitise your sales forecast.
INSIST ON ACCURATE STAGE MANAGEMENT
You can’t forecast accurately if the opportunity hasn’t been accurately placed at the right stage in the pipeline. You must carefully document what you mean by each sales stage, and what milestones must be achieved before a deal can be promoted to the next stage. Even better, base your pipeline stages on verifiable phases in your prospect’s buying decision process. You can learn more here.
USE PAST BEHAVIOUR TO VALIDATE
Another very powerful application of sales analytics is to compare the past performance of similar deals with the projections being applied to current opportunities. How often has a similar deal closed in a similar time from a similar stage?
When you apply this perspective, you’ll almost certainly find that there are a number of “hopeful outliers” in the pipeline that are depending on unnatural acts to close by the projected date – which they almost certainly won’t.
DON’T FORCE THE ISSUE
Sales leaders can often be the root of the problem. If you press your sales people to bring deals forward, you must at the same time require that they have a credible strategy to do so – otherwise you’ve simply created an even bigger accuracy problem.
DON’T AUTOMATICALLY BELIEVE THE CUSTOMER
Sales people must apply their judgement when a customer tells them when they plan/intend/hope to place an order by. It is no excuse, and weak salespersonship, to simply record what the customer has said without applying judgement.
Sales people must compare the customer’s projected close date with how other similar deals have evolved in practice. If the currently suggested close date involves an unnatural act or uncommon behaviour on the part of the customer, sales people must adjust the recorded close date accordingly (and document their reasons).
So there you have it – a handful of simple, actionable recommendation that will serve to ensure that the projected close dates in your sales team’s pipeline are a much more accurate basis for sales forecasting.
Have you any other tips that have worked for you? Please use the comments box to share.