Sales forecasting is much more than just rolling up a number. You have to be able to identify risk and upside, know which deals are legitimately in play, and how much pipeline coverage you really have. You also need to be able to put all of that in context, factoring in past performance and win loss patterns. It’s a complicated process that’s fraught with opportunities to miss your mark.
In fact, in a recent survey of sales VPs, nearly half said forecast accuracy was their biggest challenge. By contrast, only 7 percent of those polled felt good enough about their process to call it very efficient. So, what does it take to be part of the confident 7 percent?
Here are four strategies you can implement today to improve the accuracy of your judgements and reduce uncertainty in your sales forecast:
1. Get your entire sales team involved in the forecast
The more input you get about a deal the better. A recent article in the Deloitte Review championed the merits of “collective intelligence”, the idea that we’re smarter together than we are apart. Don’t rely on one person or a small group of sales executives to call your number. Instead, leverage the collective wisdom and experience of the group by involving the whole team and relying on multiple data signals to call a more accurate forecast. The combined intelligence of a large team — from your reps to managers and execs — can lead to better judgement calls and predictions.
2. Guard against cognitive biases when calling your number
A cognitive bias (also called a heuristic) is a shortcut that your brain takes whenever you make a quick judgement call. You don’t realize it, but your decisions are filtered through your own likes, dislikes, and experiences. That’s where the bias comes in and hasty decisions are made. An article in the Harvard Business Review identifies three common biases that can undermine your sales forecast if you’re not careful:
- The Overconfidence Trap: You tend to overestimate the accuracy of your forecasts because you overestimate your ability to understand situations and to predict the future.
- The Prudence Trap: You tend to be overcautious and too risk averse (also known as sandbagging).
- The Recallability Trap: You tend to be overly-influenced by a single event that left a strong impression — and that can distort your memory.
How do you avoid these traps that can cause loss of accuracy in your forecast? Use unbiased data, historical trends, and patterns to gut check your assumptions and make better decisions. Gather insights and interactions that you may have missed to avoid an impulsive decision. New AI-powered forecasting tools, like Clari, provide predictive insights and automatically harvest email, calendar, and other activity data so you always have full visibility into the true health of your deal.
3. Develop a structured process for your forecast call
You can’t call your number with confidence if everybody in the organization forecasts differently. Establishing a consistent, structured 1:1 and team meeting process across departments, teams, managers and reps will save you a ton of time and energy, and will greatly improve your forecast accuracy. For example, your roll up process for your APAC team should be the same for your EMEA and US teams. Develop and reinforce a disciplined, well-structured weekly forecast cadence that’s uniform across your organization. Establish goals and objectives for each meeting that use the same KPIs, dashboards, and tools to measure performance.
4. Incorporate AI and predictive modeling to gut check your forecast
Using a statistical method based on machine learning algorithms and AI data can help you improve your forecast and gut check your assumptions. By comparing your quota and your team’s call with science-based projections, you can better identify and avert risk and call your number with confidence. While AI won’t replace human intuition, it will help to reduce your margin of error and help you close more deals predictably.
Finally, remember that an accurate sales forecast goes far beyond just calling the right number. It provides a view into the current and future state of your business that informs executive decisions and enables you to drive organizational alignment to reach your company’s revenue goals.
For more tips on how to improve your sales forecast, download our free guide, Rev Up Your Forecast With AI today!