Special thanks to Michelle Vazzana for contributing to this blog post. Michelle is the author of Cracking the Sales Management Code and Crushing Quota, and Co-founder + Chief Strategy Officer at Vantage Point Performance.
Using pipelines to forecast sales is necessary, but unless salespeople are actively coached to achieve desired outcomes, forecasting alone will not help increase win rates and could be the reason why they are not improving.
In this article we continue our examination of the uses of sales pipelines, as well as the misconceptions surrounding them, by digging into the practice of sales forecasting. Our research shows that forecasting is typically the most formalized and pressing demand on sales leaders’ time. But why? What effect does it have on overall win rates? Does it really help salespeople achieve desired organizational outcomes?
Sales forecasting, or examining a sales pipeline to predict what deals will close and when, is an essential tool for executives to run and manage their business. If an organization has a sense of what deals are near to closing, they can make better business decisions about how to configure territory, how many more salespeople they need to hire, or how to allocate potential funds for other areas like marketing or manufacturing.So, the purpose of sales forecasting is really to give leaders a sense of what is coming so they can confidently plan their next moves. In this sense, forecasting is a necessary business function; however, forecasting requires a lot of effort by sales managers, effort that would be better spent on areas we will discuss later in this article.
The Downside of Too Much Forecasting
Why is so much effort spent forecasting when there is clear evidence that it’s not the most effective use of sales manager time? Well as we’ve said, the data that comes out of forecasting sessions is valuable. These data are just numbers though. And often sales managers are asked to scrub pipelines for these numbers instead of using that time to develop a plan for increasing them.
Unfortunately, forecasting only provides a near term estimate of the business that is going to close. What this does is orient executives as well as sales managers to deals that are in the late stage of the buying cycle, and away from earlier stage deals. Now you may be asking why this matters? Don’t we want to ensure that these deals get over the finish line? Of course, but late-stage deals are going to get a lot of sales manager attention anyway. What if more effort was oriented towards getting more deals to this late stage instead of focusing on ones that are already there?
Forecasting often gives sales leaders and executives a false sense of control. Let’s use weight loss as a metaphor. When you step on the scale, you are getting a snapshot of your weight at that moment. Weighing yourself periodically allows you to see if your weight loss plan is working, but this practice is not helping you lose weight. In fact, it may feel like a positive behavior to check your weight daily but weighing yourself too frequently is excessive and doesn’t allow enough time for whatever plan you’re following to work.
Now let’s move this comparison back to sales forecasting. If you are forecasting too frequently, you’re not allowing enough time for whatever sales enablement tactics and strategies you’re implementing to take effect. It seems like you’re taking action that will move the needle on your desired sales objectives, but really, you’re taking away valuable time that could be better spent by your sales managers.
Our research shows that a significant number of sales managers are tasked with having pipeline forecasting meetings every week, and sometimes multiple times per week. How drastically can your sales forecasts change week to week? That time would be better used by sales managers to coach their teams so that when it is time to forecast, the numbers actually improve.
Top Sales Managers Do This Instead
Our research has found that high-performing managers spend less time forecasting and more time coaching than average sales managers. They get involved more often in early to mid-stage deals because coaching has a much larger impact at these stages. Whereas deals are pretty well baked by the time they reach the late stage, coaching earlier can affect the trajectory, size, and quality of deals. Finally, by getting involved in these earlier stages, sales managers can work to improve pipeline health.
So, as we have discussed, while sales forecasting is necessary, it should not be your sales manager’s primary focus. Too much forecasting does nothing to improve your win rates, and instead may be bogging your sales managers down. To rectify this problem, managers should focus on using more time to coach their people and working to increase overall pipeline health.
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