3 Steps to Accurate Sales Projections
Doyle Slayton | Jan 27, 2010 | Comments 6
Sales projections are among the most common challenges for sales people and their managers. Why? What causes these forecasts to be so far off the mark? Some reasons include…
- Over optimism… people think it’s about about being positive.
- The sales person needs to buy some time… keep their manager off their back… so tell the manager what they want to hear.
- The team and the manager collectively lack an understanding of the business and their sales cycle.
- The deadliest culprit of all… carrying over prospects who push month after month and keeping them on your projections report.
Here is a list of 3 steps I take to ensure my projections are accurate…
Be Honest with Yourself – It’s interesting to watch sales people. We get so excited about how much the prospect loved our product, and of course, we love to pat ourselves on the back about how much, “the prospect loved ME!”
It’s good to be optimistic, but when it comes to projections, it’s better to be realistic… and better yet… to be accurate! The first step in accurate projections is to look at your pipeline and get real.
Know Your Sales Cycle – The second key to successful projections is understanding where your prospects are in the sales cycle. As an example, much of it depends on the size of the account. Larger accounts typically take longer, while smaller accounts may close after the initial meeting.
Here’s another example… We’ve all been in situations where our prospect is fired up about how great our product looks… only to find out they were full of hot air. Ironically, the prospect who held their cards close ends up being the real buyer!
Never assume that someone is going to buy before they’ve gone through the natural progression of your sales process. Prior to adding a prospect to your projections, you need to have a strong verbal or written confirmation that you are the top choice and you have a timeline for a decision.
Know Your Closing Ratio – Now… We are in touch with reality, and we have a clear picture of which prospects are at the closing stages of the sales cycle. There is one step left to decide who makes it on the projections report. What is your typical closing rate?
Once I’ve narrowed it down to my strongest prospects, I’ll project about 20% to 30% of that pool. Most of the time, my projections are dead on. About 70% of the prospects will fall under the following categories…
- Something unexpected comes up and they are forced to put the project on hold.
- They decided to stay with their current vendor. They think it’s easier to keep the status quo.
- Our product didn’t meet the needs of the prospect. It just wasn’t a good fit.
- I got beat… another sales person out sold me on this one. It burns me up what that happens.
Accurate projections aren’t rocket science. It comes down to being honest with yourself and knowing your business. Remember this. You gain a lot more credibility with your manager and the executive team when you are consistently on target.
What other techniques do you apply to ensure your projections are accurate?
You are absolutely correct about the need to be accurate.
Poor accuracy causes damage to the business and not only if one misses credibility but specially because the resource planning is costly. An inflated plan requires disbursements when idle money is nowhere.
To me the key element to control is the timeline; if you know well the time schedule of the customer, then you are safe issuing your forecast with the odds that your knowledge and experience suggest for a given date, following the customer deployement plans.
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Good stuff Doyle!
You’re exactly right on! The problem is that most people that go through the process you’ve described and then only project 20% look at the resulting # and get desperate ;-o
The problem is that the process is too subjective. While it’s impossible to remove all subjectivity when evaluating each deal in the pipeline, it is possible to develop a set of criteria against which you measure each deal. BY applying the same set of criteria consistently, not only will projections be more accurate, the closing ratio improves as well.
You are right on track. I would only add, ‘Know what you are going to do the guarantee the forecast.’ Too many people put out a valid forecast and fail to take the actions required to ensure that it come true. A forecast is not simply a prediction of the final outcome, it is a promise of actions to be taken to bring in the sales.