In the realm of sales leadership, predicting the future is akin to steering a ship through a storm. It's during these times that forecasting becomes a combination of science, experience, and art.
Understanding Forecast Categories
The backbone of reliable forecasting lies in understanding and defining your categories. Different organizations may have varying definitions for categories like "commit," which might indicate caution or confidence depending on the sales culture. The distinction between categories is critical.
Here are the categories we used:
- Worst: This is the doomsday scenario, often limited to deals with clear closing timelines despite any chaos. This number should be constant, or ideally, increasing.
- Commit: This is your best estimate minus a conservative percentage, reflecting a number that should realistically increase over time.
- Best: This is the most favorable outcome, but doesn’t include the entire pipeline.
Each deal must then be categorized appropriately based on risk.
Assigning Deals to Categories
The crux of effective forecasting is allocating each deal to the right category. This is done by examining each deal through lenses of risk assessment. Ask:
- 1. Will it close based on exit criteria achievements?
- 2. Will it do so on time according to next steps and deadlines?
A simplistic view, surely, but the complexity lies within the exit criteria at each sales stage.
Mapping Out the Possibilities
Let's walk through examples:
Consider a deal where you've met most exit criteria but are still negotiating. The prospect agrees on urgency and solution but is above budget and not exclusive. If you had several similar deals early in the quarter, you might tentatively commit one based on time for negotiation.
Now, if we turn the fourth stage green but with a shorter timeline, we have a commit-worthy deal. Here the budget is secure, and the legal process is foreseeable. But, constant engagement is key. This deal is high-priority and time-sensitive.
Finally, the deal turns completely green across all stages, with legalities scheduled and a compelling event driving closure within a month. This meets the criteria for a worst-case forecast, a near certainty.
🚀 Revenue Booster
Suggest a strategy from the article to boost revenue:
One strategy to boost revenue during economic uncertainty is to carefully categorize and allocate deals based on risk assessment. By assigning each deal to the appropriate category, sales leaders can prioritize high-priority and time-sensitive opportunities, increasing the likelihood of closing deals and generating revenue.
The Art of Playing the Spread
You'd render yourself at a disadvantage if you presented a zero commit with a large pipeline just because deals are not at their final stages. Therefore, assessing each deal within its proper forecast category, along with considering the sales quarter context, allows for a balanced and dynamic forecast.
It takes more than just intuition to forecast in sales, especially during economic fluctuations. By understanding and applying tailored categories, assigning deals with precision, and balancing probabilities, sales leaders can steer towards more accurate forecasts.