“Forecasting” : in quotation marks because you’re doing it wrong. FORECAST ACCURACY is the correct KPI
Attn: Chief Revenue Officers, CEOs, COOs, VP Sales
Sales Wound #74 : “Forecasting” vs Forecast Accuracy
The “Forecasting” methodology that you’re using is just plain wrong. Most teams use a flavor of Salesforce’s forecasting module “best case”, “commit” with a Weighted % Probability applied. This is based on Qualitative “feel” which is why it’s so erroneous.
30,60,90 day FORECAST ACCURACY is the key KPI a sales leader should be benchmarked on.
Why? Because all the things you can implement, process, tactics, strategy, organization, etc ultimately roll up to being Accurate about your forecast into the future. The Accuracy tells you everything because inherently you can’t be accurate unless everything leading into the revenue machine is quantifiable.
I learned this from a few of the best SaaS sales leaders over the years and it’s the only Forecasting methodology that’s ever worked for me. IMHO this is the single most important KPI for a sales team, period. If you know there is no chance of making your number, then you better be aware earlier to make adjustments and set expectations.
Why do you even need to Forecast yet alone be accurate? By being accurate 30,60,90 days into the future the business can invest optimally and you can set expectations as to what you’re committed to delivering. Blowing out your number is almost as damaging as missing your number because it means that the business under invested significantly.
How do you measure this? It’s Simple. No fancy machine learning predictive engine black magic required.
30 Day Accuracy: At the first of the month take a snapshot of your pipeline (export to .xls). Salesforce does not natively do this. Based on that snapshot of the data, make your best guess as to what the actual $ number will be on the last day of the month. Actual $/Guess $ = “30 Day Forecast Accuracy %”
You’re asking yourself, isn’t that just a guess as well? It shouldn’t be if you have a very well defined sales process, gates, checks, etc. By continually trying to improve the Accuracy %, you are forced to seriously evaluate the sales process and implement a more quantitative approach leaving the “gut feel” out of it. You have to dig and dig and dig to find out how to refine the sales process so you can get this to 90% Accuracy. It doesn’t matter if you use BANT, Meddic, super predictive tool Y, new buzzword selling, etc. Use whatever you want as long as the Accuracy improves month over month.
Knowing you’ll be taking a snapshot of the pipeline on the first of the month, the pipeline stages, qualification checkboxes, etc should be up to date (forcing function) and you should be able to take only those deals that have achieved the proper rigorous qualification. Rigorous, consistent, defined qualification = predictability.
You’re going to absolutely suck in the beginning and that’s ok. Improve the % Accuracy until you’ve hit 3 months consistently at 90%.
Then you begin focusing on 60 day Accuracy and how do you get this to 90%. After you’ve figured that out, then it’s onto 90 day Accuracy.
The best sales leaders who understand they’re building a revenue blueprint hold themselves to 90% accuracy for a 90 day period. That’s the benchmark and it’s absolutely attainable.
(note: Howard Hill was the “world’s greatest archer” who actually split the arrow live on film in the making of the 1938 “Adventures of Robin Hood”. Wikipedia)
What about when you’re less than $10M ARR? Yes, revenue is volatile during this period as you’re still figuring things out. There still is no reason you can’t continue to focus on improving your accuracy because at some point, you will have enough closed deals that the holes in your sales process will become glaring. Evaluating the Accuracy % every month forces you to revisit the sales process and making it fully quantitative. There should be 0 emotion in your pipeline.
Let your inner Spock shine when improving Forecast Accuracy! Turn “Forecasting” into Forecast Accuracy = 90%
Emotions are Illogical (in sales forecasting)