Are your forecasts accurate? Latest research from CSO Insights notes that only 44% of forecasted deals are won, and much of what’s left never closes at all. To many of you, a “perfect forecast” is a pipe dream, but guess what, entirely possible to get within at least 5% of your forecasted goal. Best-in-class companies are not magicians, they simply understand that CRM is not enough, and now you can too! Here are 7 reasons why CRMs FAIL at forecasting:
1. Out-of-the-box Percentages
Most CRM systems provide “percentages” associated with stages in the pipeline, but there is no historic data, so there’s no way to adjust and keep your forecasting accurate.
2. CRMs Focus on Sales Activity, Not Buyer Behavior
CRM systems focus on sales activity for tracking leads through the pipeline rather than focusing on the decision making process. Because Sales activity is from the inside-out, it tends to be inaccurate. There should always be a check in with the buyer, to make sure that the sales process is aligned with where they’re at, at each stage, this will make for more realistic opportunity tracking.
3. Don’t Know How Often Deals Close From their Current Stage
A simple analysis of the actual average close percentages from each stage in the pipeline can be tremendously illuminating. If you’re CRM doesn’t provide this information (most likely it doesn’t) then it’s worth looking into a performance management application to monitor and reach to this in real-time.
4. Don’t Know How Long it Takes for Deals to Close From Current Stage
Sales Pipeline Velocity is a great framework from measuring pipeline health, and due to the lack of historic data stored in most CRM systems, it’s a major report that’s missing from the weekly review. There’s usually a natural cadence to winning deals; how long, on average, does it take to win a deal from each stage of your pipeline? It’d be nice to know, but you won’t find it in your CRM.
5. No Visibility into Deal Velocity
Understanding your average pipeline velocity (of winning deals) is an important predictor of success, complimented by an awareness of how long each particular deal has remained at the current stage in the pipeline. Sales managers know, instinctively that the slower deals move, the longer they take to close. It’s hard to forecast accurately without understanding individual deal velocity.
6. No Evidence That the Prospect Must Do Something
At the end of the day, how many of your prospects actually buy something? There’s an increasing number of deals ending, not due to a competitive loss, but rather a decision to “do nothing.” How confident are you that your prospects are committed to change? Have you added value? Have you consulted them and helped them develop a compelling economic case for change? If not, they’ll probably do nothing.
7. No Idea if Your Deals Are Likely to Close
In the end, if the prospect decides to make a buying decision, what are the chance that you’ll be the one who win their business? Based on a number of win-loss analysis exercises, it’s clear that many of the factors that influence your chances of success are visible at an early stage in the process, and comparing individual opportunities against an “ideal prospect profile” or “persona” that details out demographic, environmental and behavioral factors can help identify which deals you should focus on, and which you should qualify out.
This post was modified for publication on this blog, was written by Bob Apollo, CEO & founder of Inflexion-Point and originally posted here. Connect with Bob on LinkedIn or follow him on Twitter @BobApollo or visit his blog for more best practices.