January 22, 2020

Forecasting

The Best Way to Forecast Is... Not to Forecast!

Kurt Leafstrand

Kurt Leafstrand

Kurt Leafstrand
Kurt Leafstrand

VP Products, Clari

Best Way To Forecast

Here at Clari we’ve been working with the world’s leading sales teams to drive better revenue performance for almost 7 years, and during that time have learned an incredible amount about how they manage their forecasting processes. Perhaps the most fascinating revelation from all of our conversations is that many of them achieve incredible sales forecast accuracy by… not forecasting at all.

Huh? How can that be?

Well, instead of spending all of their time on “calling a number”, they engage in a number of other best practices around sales execution which do far more to improve the accuracy of their sales forecast than focusing on the number itself.

But before we get into all that, let’s review why sales forecast accuracy is so critical to the business.

Why Sales Forecast Accuracy Matters

The sales forecast is one of the most important processes in any company. It determines how the company invests and grows. Based on that number, the company allocates budget, distributes headcount and plans for the future, defining how much marketing can spend, how sales can scale and what gets invested back into the product roadmap.

If you over-forecast and miss your number, the company sees less revenue than expected which can lead to layoffs or downsizing. Alternatively, exceeding your forecast can be equally bad for business. That unexpected revenue could have been put to good use had the team known about it.

Ultimately, when the sales forecast isn’t accurate or can’t be trusted, it’s impossible to make investments with confidence.

Ok, Back to NOT Forecasting...

So we all agree sales forecasting accuracy is critical to growing with confidence, but is the best sales forecasting method really to not forecast at all? Well, of course forecasting is a critical activity that determines the roadmap of the company, but what if you weren't spending time on all of the things you typically associate with a sales forecast and, instead, focus on the behaviors required to hit your number? What are the behaviors the world’s leading sales teams do to hit their number? Let’s look at three of them.

Focus on Behaviors, Not Outcomes

Back in the early days of Clari, our team met with a visionary sales operations leader at Facebook who dreamed of a system that would work alongside their CRM to focus reps on the most important sales actions, rather than simply focusing on the desired result (Mr. Miyagi would have probably called it “Karate Kid selling”).

It has since become clear to us across hundreds of Clari deployments that one of the best ways to drive better forecast accuracy is not to create a bunch of deals in your CRM that, lo and behold, add up to the number that you need to hit for the quarter.

Instead, it’s to make sure you are engaging in the right set of behaviors as a seller (or manager) that’s going to result in predictable outcomes.

Granted, this is often difficult. Few sellers today are even aware of their own activity patterns (Quick: How many of your key accounts did you meet with last week? What percentage responded to your emails?), much less able to know how much effort they need to put in (and what sort of effort) to produce a desired result. But, armed with the right data and prescriptive insights, you can drive your performance to new levels and hit your number with remarkable consistency.

Depending on your business and sales motion, the key sales activity data points leading up to a sale will be different, but tracking that data and making it readily available to the entire revenue operations teams grants them a treasure trove of insights.

Here at Clari, we track and look at hundreds of activity data points for every deal, including:

  • Emails sent and received
  • Meetings set
  • Attachments sent and opened
  • Marketo engagement
  • (and many more)

Having this activity available at a moment’s notice gives our reps, managers and leaders immediate visibility into the health of a deal — and what actions a rep can take to move the deal along. Here’s an example of how we use it to inspect our pipeline.

Let the Deals Speak for Themselves

Reps and managers who don’t forecast accurately love putting in “their call” in one of two ways that are usually counterproductive to providing a solid outlook on the business.

One class — call them sandbaggers — calls a very conservative number based only on the deals which are nearly 100% likely to close. This results in a number that is (almost) certain not to be missed but provides no view into what will likely be the overall achievement for the quarter. Why? Sandbaggers either want to play it safe with the deals they know will close or want to seemingly perform end-of-quarter theatrics by reeling in that previously unforeseen deal that makes them look like a hero when they exceed their quota at the end of the quarter. This results in the rep blowing out his number and your sales forecast missing the mark.

The other class — call them eternal optimists — calls a number that’s remarkably close to their quota (but not too close, since they generally like to fly under the radar and not raise eyebrows) even if the deals aren’t strong enough to support this claim. This results in a number which isn’t based in reality but rather in a hope that it’s all going to work out well in the end. Eternal optimists would rather have their managers believe they everything is fine than risk disappointment from their superiors.

What’s the right way? To focus on your pipeline and let your deals speak for themselves. What is the true status of those deals? What does the data tell you? Do you have a sequence of events to close? Have you identified and are in contact with the economic buyer?

Today’s predictive forecasting solutions can look at your pipeline — both the deals that are there and the deals that don’t even exist yet — and have a very strong sense of where things are likely to land for the quarter. By letting the machine drive your sales forecast call, you can always have a realistic view of where you’re at, and proactively take action to impact the outcome.

But even without predictive forecasting solutions, you can spot check whether a deal will come in or not based on the activity data surrounding it. Deals with lots of activity and engagement are in a more promising spot versus those without.

Prioritize People, Not Spreadsheets

Finally, if you’re a sales manager, instead of spending hours attempting to roll up your number across your team based on your best guess as to the state of their deals, focus on the process of inspecting your team’s deals and investing in coaching them to success. In some organizations, this can be an overwhelming prospect, since it can be difficult to objectively assess a deal both in terms of its likelihood to close as well as how effectively it’s being worked by the rep.

However, when you have visibility into the behaviors driving a deal and can easily see which deals are in play or at risk, you don't have to spend time interrogating your reps during 1:1s. Instead, you can identify the deals that need the most attention within the first few minutes (or even before the meeting) and spend the rest of the time coaching. After all, working with people is why you got into sales in the first place, right?

So, when it’s time to enter next week’s sales forecast, don’t focus on the number. Instead, focus on the behaviors, deals, and people that are going to help get you there. You’ll be amazed at how “un-forecasting” will help you meet (and exceed) your number.

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