Imagine a world of accurate sales forecasts. Imagine prospects relieving sales people of the need to do forecasts. Monthly, they send a report to the sales manager, “Your guys are working with us on this deal. We’re going to make a decision and place an order in 75 days, right now we view the probability of the deal going to you as 73% and we expect the PO to be $1,553946.17 (roughly).”
Hang on, no I’m not smoking anything, I am dreaming a little.
We’ll probably never reach the day of buyer verified forecasts, but we can dramatically improve the forecast by looking at it from the buyer’s point of view.
Sales forecasting is and will be a hot button for all execs. It’s natural, we want to be able to predict as accurately as possible, what sales volumes and revenue flow will be. Accurate sales forecasts are important for all sorts of things–demand planning/forecasts, supply chain management, setting shareholder expectations, and many other things.
There’s a lot of market data showing how inaccurate sales forecasts are. The numbers are frightening–and I think they are overstated (at least in terms of accuracy).
As I’ve written about very often, one of the fundamental flaws we make in forecasting is associating the forecast with where we are in the selling process. “We’re in the proposal phase, so our probability of winning this $ 1M deal in the next 90 days is 75%.” Managers take this–being conservative, they add their “English,” forecasting the deal for $600K and closing in 100 days. As it goes up the food chain, the forecast is tinkered with and by the time it gets to the top of the food chain, the forecast may be for $100K in 120 days—but it’s taken as gospel and everyone counts on it. Even worse, because everyone knows it’s been tinkered with, they say there is some “upside” to the forecast.
So there are all sorts of problems we inflict in the process of forecasting, but the biggest is it’s all based on flawed logic. Just because we are “75% through the selling cycle–and the customer’s buying cycle” doesn’t mean the likelihood of the customer choosing us is 75%. It just means we are 75% through the process and has nothing to do with the propensity to buy.
So how are we to develop an accurate forecast?
What if we shifted our perspectives and “ask the customer to forecast?” What if our forecast was “verified” by the buyer?
Now I’m not talking about literally going to the customer and asking, “What would you forecast this as? Do we have a 50%, 67.563%, or a 72.372% chance of winning this business by this date?” Neither would I go to the buyer and ask, “How certain are you that you will give us this $1M order in 9o days?”
But what if we got information directly from buyers or directly verified by buyers? What if we could assess buyer attitudes toward us and our competitors? What if we could look at buyer behaviors on similar decisions involving us and out competitors? What if we combined these views with an assessment about the buyer’s likelihood for buying—from us—-by a certain date? While it is still an estimate and won’t be perfect, since it is focused on the buyer’s perspectives, it’s more likely to be realistic.
Here are some of the things we can verify with the buyer:
- The sense of urgency or business case for taking action: Does the customer have a compelling sense of urgency, do they have a strong internal business case to take action in solving a problem. Note this is not necessarily the business case we present to them–do they have a strong, defensible business case for taking action?
- Do they have strong internal support for taking action: Have they lined up internal support with executive management, particularly the CFO. Regardless how strongly they feel about a solution, if they don’t have internal management support and the solution is aligned with the top strategies, the project won’t be funded.
- Do they have a deadline where they must have a solution in place? Is there something that is forcing them to have a solution in place by a certain time?
- Are there consequences to the customer for not having a solution in place by a target date? What happens if they don’t make their deadline? What happens if they slip the target date?
- What is their past track record for making decisions and moving forward on projects like this? While not totally predictive, past behavior on similar projects is an indicator of what they might be doing with this project.
- What are their attitudes toward you and the competition? Here’s where it becomes more difficult to make an assessment. Are they embracing you, making you part of the project team? Are they embracing the competitor?
- How is the customer engaging us in their deicsion-making process? Are we collaborating or closely partnering with the customer? Is the customer actively engaging us? Are they seeking our views in helping them address tough business challenges? Or are they holding us off, are they distant, formal, standoff-ish? Are they engaging us more closely than the competition?
- What is our past track record with the customer? Do we have a strong relationship? Have we worked closely in providing solutions that create value? Do they have a strong opinion of us? Do we have a record of performance with the customer?
There are more areas, but these provide a starting framework for how we might develop a forecast based on the customer or buyer’s view. The responses to each of these questions will change as the customer goes through their buying process. The responses to these questions enable us to adapt our sales strategies, better positioning ourselves, influencing more positive responses as the buying cycle continue.
We’ll never get the customer to provide us a forecast, but if we take the customer input and perspective, we can increase the accuracy of our forecasts.
(By the way, we have a small guide on creating Buyer Verified Forecasts. Send me an email if you want a free copy. Be sure to include your name and company name. Send it do [email protected])
