There’s nothing worse than staring at a sales forecast that looked reasonable three months ago – and now you can see it’s not going to happen. The numbers you presented to the sales team? Long gone. The deal you expected to be done? Still in limbo. And now, it’s your job to explain why.
It’s a scenario that all too often plays out in real life – and more often than sales leaders would like to admit. There are usually multiple reasons why a sales forecast can fail. The most common reasons for a failed sales forecast, however, concern the quality or number of the leads in question.
The Quality vs. Quantity Issue
In most instances, failed sales forecasts occur due to bad maths. More specifically, someone made bad assumptions about the number of leads that would translate into closed sales. Some businesses rely on wishful thinking statistics for conversions or forget to take into account the time it takes to work leads through the funnel.
If your leads are unqualified, it doesn’t matter if you have hundreds or thousands of them. Your conversion rates will be low, and the sales cycle will stretch on forever, and your forecasts will fail.
On the other hand, if you have exceptional leads, but not enough of them, your sales team will still fail to meet their quotas. They’ll simply be lacking in volume.
Why Lead Quality Matters More Than You Might Think
Too many sales managers depend on volume for forecasting. More leads mean more success for the sales team, right? More meetings equal more productivity and more win-win situations for the entire company!
If those leads are not to your target market, however, it can be more effort than it’s worth. Poor lead quality shows up in various ways. The average sales cycle doesn’t take three months to close; it takes six. The deal you thought was stuck just keeps looping back to “we’re still thinking about it.” The decision-makers who showed interest in your product or service? They ghosted you.
If this sounds all too familiar, it’s not your sales people that are failing; it’s the quality of the leads they’re following up on. Consider investing in a lead generation agency or refining your targeting processes. The people in your pipeline deserve the time your team spends following them up. Targeting quality leads will not only give them a better chance of converting, but it will also shorten the sales cycle.
When Volume Is Your Challenge
It might be that the leads your sales team are working with are great; there just aren’t enough of them. This happens a lot with businesses that rely solely on referrals or inbound leads. It can be a bit hit and miss.
Your pipeline is bound to be erratic if one source of qualified leads runs dry all of a sudden. Your forecasts will be impacted, too. The answer is not to aim for unreasonably low-quality leads or think of any company as a viable target. Instead, aim to develop a consistent strategy for generating enough qualified leads of value.
Fixing Your Forecasting Process
Even if your leads are spot on and you have the right number of quality leads, forecasting can still fail if the forecasting process is flawed. Many teams create their forecasts using far too optimistic or gut-feel measurements. Someone may be convinced that a deal is “90% likely to happen” because the potential client was so enthusiastic during the last call. There’s no such thing as a won deal until the contract is signed.
To make forecasting work, use good data rather than optimism. Use measurements that accurately reflect the state of your sales cycle. How many qualified leads become proposals? If 20% looks realistic for conversion into proposals, don’t push your luck by predicting 40% next quarter.
Timing is another factor. Use average times needed to complete deals instead of thinking that you’ll close the deal quickly because the client was so enthusiastic about your offering. Use realistic measures. The B2B marketplace is an entirely different beast when it comes to sales cycles – they take far longer than you think. Twice the time you expect is often realistic.
Building a Pipeline That Better Supports Accurate Forecasts
The best way to build accurate forecasts is not to focus on data but to build and maintain a healthier pipeline in the first place. You can do this by ensuring your team focuses on lead quality, and by ensuring they have more than enough of them so you won’t have to stress about busy work. You should also ensure that your processes are trackable so that you know what happens with each deal at every stage of being sold.
Also, don’t underestimate the importance of follow ups. Many forecasts fail simply because someone’s lost track of a deal that seemed promising in the beginning, but fizzled when your sales team dropped the ball on engagement. If someone in the company on the other side of the line still looked interested in your offering three weeks down the line but has not heard anything from you? It’s highly likely that they’re now chatting to one of your competitors.
Establish a fail-proof follow-up system to ensure your prospects get the dialogue and attention they deserve when they need it. Use a Customer Relationship Management (CRM) system that tracks what happens to each deal. Create reminders or a flowchart that guides your sales people on how to follow up.
When You Should Consider Rethinking Strategy
If you’ve done all of this and your forecasts still fail, it might be time to rethink your strategy rather than tactics. The problem might not lie with execution but with targeting the wrong clients who either don’t have the budgets for your service or product offering, or with focusing on industries that are not well-suited to your pipeline.
The good news is once the source of failed forecasts relates to strategy, you can fix it easily. Get better leads and quality, sufficient volumes and new measuring tactics, and you’re set!