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| Sales Probability Process Management |
Forecasting sales is tough. Actually forecasting anything is tough, but sales is particularly difficult, because of the number of variables. Most sales are multidimensional and in each dimension there’s a degree of uncertainty. And then there’s the overall risk of something going wrong – the ubiquitous Sods Law ‘if something can go wrong it will’.
How many dimensions are there to each sale? In this list there are 12, but surely a lot more could be added if anybody wants to make it even more complicated.
The Customer
The customer’s ability and motivation to take some action. Without the customer writing a cheque, signing an order, or handing over the credit card, there’s no sale. The ability to take that action is likely to be fixed within tight parameters, but the motivation to take that action is a different matter. It’s a combination of aspiration and risk.
It’s easy to see the likelihood of the customer taking action is itself a combination of authority, capacity, aspiration and risk aversion. A buyer might have the authority to buy up to a certain value, provided she can justify it with a business case. But be reluctant to make a choice without considering the boss’s preference. She might be excited by the particular value in an offer and the plaudits to come from a brave choice. But at the same time, nobody ever got fired for buying IBM, or that’s what they used to say. The risk of a brave bad choice are just too horrible for most buyers to contemplate.
The Sale
The sale itself isn’t as simple as some might think. The deal is made up of a product or service, or even a combination. Precisely which SKU and which service could be another two dimensions. There’s the price to be paid, more often a feature of the buyers capacity to buy than the sales guys ambition to sell. And then there’s the time frame. Precisely when will the customer sign the contract, and when will delivery take place. Every sale is a product at a price at a time.
The Sales Rep
Another category of dimensions is the sales exec. In most sales teams there’s a range of skills, from exceptional to not very good, and another range of tenacity from won’t let go to not very bothered. The relationship between sales rep and buyer is another infinitely variable factor, which can easily change over time. Lastly there’s the sales reps instinct. Ultimately the only judge of how likely a sale is will be the sales rep. How confident is she, and how reliable a judge is she?
The Rest
Finally, so as not to labour the point, there’s those external factors. The influences nobody can do anything about. The buyer might get promoted, or fired. The business might get taken over, or go bust. The world economy might implode. Who knows what disasters are waiting around the corner.
That’s 4 customer dimensions, 3 product dimensions, 4 sales rep dimensions, and the overarching external events – all to get right for an accurate forecast.
Even keeping the concept relatively simple, we can see there are possibly 12 different dimensions. Get 11 right and 1 wrong and the forecast is still wrong.
No wonder sales forecasting is so difficult.
That’s why sales managers use weighted probability forecasting. When each deal in a pipeline is assigned a %age probability, used to factor the estimated sales value, each individual sale forecast might be wrong, but the total adjusted value of the pipeline will be much closer to what actually happens.
Quite how they calculate that weighted probability forecast is another subject.
Why doesn’t the traditional approach to selling and sales management work so well any more? What can the modern sales professional do to stay relevant in today’s customer driven markets? Check out our eBook Reengineering Sales Management for ideas on how to embrace the new order of customer driven buyer/seller relationships.
