Sales Pipeline forecasting – “Fact or Fiction?”

“I believe I have a 50/50 shot of closing this deal.”

“They loved our presentation; I’d give this a 75% chance of closing at this point.”

“My contact is reviewing our quote internally; I’d say we have a 90% chance of closing this one.

Sound familiar?

How often do you hear these optimistic statements from your sales team, and then find yourself asking, “Whatever happened to all of the other deals that you forecasted at 90% chance of closure?”

Only to hear the typical responses:

“The prospect went dark.”

“The project was put on hold.”

“My prospect wasn’t able to get the budget.

“Turns out they were looking at another competitor that offered a better price.”

This scenario is being played out across the globe, in every sales organization small and large, by salespeople who are feeling the pressure to show pipeline activity.  When required to assign a stage and percentage chance of closure to a deal, the critical thinking for most salespeople is biased by wishful optimism and hopeful inference. On one hand, pipeline stage and forecasting is highly influenced by downward pressure from management to show opportunities that have a chance to close during the current quarter.  On the other, salespeople are influenced by positive feedback and interest they receive from their main contact.

“Inference is an invasion of the unknown, a leap from the known” – John Dewey (American Philosopher, psychologist, and educational reformer)

When asked, most sales leaders will admit it’s a numbers game and that the team is closing less than 25% of the deals that are forecasted at 50% or greater.  In some cases the deals are completely falling apart, while in others the close dates keep getting moved and stretched from quarter-to-quarter and year-to-year.

The question is “WHY is our forecasted pipeline so unreliable?”

Does it point to a need for more…?

  1. Sales training and sales playbooks on qualifying and closing.
  2. Hiring a team of inside hunters to free our outside team up to focus on closing.
  3. Management involvement helping to close late-stage deals.

These are all good tactical approaches that can help drive sales by applying more energy, time, and resource.  Unfortunately, these solutions still don’t get to the root cause of the forecasting issue. 

Misalignment between sales process and pipeline stages.

Regardless of the type of sales training and process a company has adopted, they all have several core components the sales team needs to follow:

  • Take the time to uncover the business drivers (Pain, Issues, Concerns and Vision).
  • Gain full clarity and access to all the stakeholders involved.
  • Clarify the budget allocation, “real” timeline, and formal approval process.
  • Address and remediate roadblocks such as competition, budget constraints and other priorities.

Whether it’s based-on experiential wisdom passed down informally through sales management or formalized sales training, the components listed above make up the foundation of all solid sales processes and playbooks. 

 “With all the time, energy, and money we have invested in sales process and CRM, why is it not translating into accurate and reliable pipeline forecasting?”

To answer this question, look no further than the company pipeline stages. Most companies are diligently training their salespeople to ask questions and get info from prospects, yet the pipeline stages are based on the answers and info the salespeople provide to prospects.

We teach our people to maintain control of the sales process and most of all NOT to rush into providing demos and quotes, yet we have them staging their pipeline and percentage chance of closure based on:

  1. Initial call
  2. Solution presentation
  3. Proposal
  4. Negotiations
  5. Contract Pending

When companies implement stages that mirror the ones above, they are following the conventional thinking that milestones and chances of closure will improve based on info and material delivered.

Aligning the pipeline stages and percentages with the company sales process.

To improve the accuracy of our team’s pipeline forecasting and the effectiveness of our sales management approach, we need to align our pipeline stages with our sales process rather than with our prospect’s evaluation process. This does not mean that salespeople should refuse to do demos, send samples, provide initial quotes and presentations at earlier stages in the relationship cycle where it is appropriate with a prospect.  It simply means that these activities do not translate into increased chances of closure or progression of the deal through the sales funnel or pipeline stages.

Stages based on opportunity qualification.

To help clarify process and pipeline alignment, I have provided below some sample milestones we use at Venator Sales Group.

  • Initial call scheduled and accepted as calendar invite.
  • Explored and uncovered issues, concerns, and vision.
  • Our contact is willing to review stakeholders, competitive landscape and decision process.
  • Access to and/or confirmed budget and initiative approval from the final decision maker(s)
  • Validation of budget process, timeline and next steps and a verbal commit to move forward.
  • Reviewed final proposal/contract with prospect and remediated all 11th hour roadblocks.
  • Signature date locked-down, and follow-up call scheduled and accepted as calendar invite.

The above example is based on actual qualification stages meant to align with a sales training program and a formalized sales process.  Depending on statistical data as well as size of deal and whether the prospect is a new or existing client, relevant percentages can be applied to each of the qualification stages above.

Added benefits of staging based on sales process.

  1. Ability to apply a validation approach by adding fields that are required to be checked off, picked, and completed at each stage in the CRM (i.e., Salesforce, HubSpot, & Microsoft).
  2. Ability to scale the sales management team by training sales operations people to effectively perform pipeline reviews based on key performance indicators versus experiential wisdom.

Besides the obvious, which is a more accurate weighted average pipeline and robust pipeline reviews, the above benefits represents just a few that result from this realignment approach.

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