The CFO and VP Sales are having another stressful quarter end. Opportunities forecast to close are sliding into next quarter. After the VP Sales leaves, the CFO realizes many deals that are sliding have been doing so for months. The quarter will have to be made by offering 11th hour discounts on upgrades to existing customers and delaying some expenditures.
Somehow the company makes the bottom line. The forecast will soon be lost in the rear view mirror as the new quarter begins albeit with the pipeline drained of anything that was closable. The CFO makes a mental note to further discount the VP Sales’ next forecast.
Beyond causing stress and compromising valuations, other potential negative consequences of inaccurate forecasting are often overlooked:
Consider how cost of sales is affected when sellers and managers spend their time and resources working on opportunities that slip month after month or worse, never close.
Consider the impact on the top line when quarter end discounting has to be offered?
Salespeople are told every month to tell management how good a job they’re doing by providing account names, dollar amounts and close dates. Sellers below quota fill pipelines, or pipe dreams, to show how quota will be attained. For these sellers, forecasting is more about keeping their jobs than predicting what will close. Even on qualified opportunities sellers provide close dates earlier than when prospects will be ready to buy. Managers below quota want to believe because they’re also being measured.
Win or lose, it’s more expensive than ever to compete for business. It’s painful for companies to expend resources based upon biased seller opinions on unqualified opportunities.
More accurate forecasting is possible if the customer’s buying process can be incorporated into an agreed upon plan with activities, approximate timelines and an estimated decision date. By not closing before buyers are ready to buy, discounting is likely to be reduced. If companies will not commit to negotiating a buying cycle they may not belong in the pipeline (nor should they be allowed to drive up your cost of sales).
It’s time to stop letting seller opinions drive the forecast. Consider the following questions:
How do you integrate a prospect’s buying process with your sales efforts?
How do you estimate close dates on opportunities in your forecast?