There are many challenges to forecasting accurately, but you can be more effective at accurate sales forecasting methods if you manage your “sales forecast killers” carefully. Consider these 10 key forecast killers and if they creep up into your opportunities then flag those opportunities as “at risk”.
Time kills all deals. Look at the opportunity age vs. your average sales cycle (i.e. win cycle). Also if the opportunity is sitting in first two stages longer your historical won cycles for those stages, then they are “stuck opportunities” and should be flagged as at risk.
Average Deal Size ($)
Review the expected opportunity size vs. your average won deal size. If your opportunity is 3x greater than your average, it should be treated differently than your regular opportunities. Larger deals have lower close rates and longer sales cycles than smaller deals, so if the sales rep is not treating the particular opportunity differently then it’s at risk. Also note if the expected deal size of a given opportunity dropped by more than 30% in later stages then it may be at risk.
Opportunities that are pushed often or slip beyond the expected close date should be flagged as at risk. If a deal’s close date has pushed more than 3x then it should be flagged as at risk.
Opportunities that are forecasted to close soon should be actively engaged with by reps. If an opportunity displays little to no rep activity over the past two weeks, it has likely stalled, diminishing the chances that this deal will close so it should be flagged as at risk.
An opportunity in the first stage of the sales cycle does not belong in the sales forecast, even if the rep marked the expected close date in the current selling period. Additionally, make sure that for every opportunity (at any stage), your reps know clear next steps that the contact will take. Otherwise, the opportunity must be flagged as at risk.
If there is negative velocity (or deal is stalling for a longer period of time in the last few stages) then it should also be flagged as a deal at risk.
By the time the opportunity reaches the late stages, your reps should be talking to a contact who has a title of your typical buyers. If your champion still has to ask for permission at this late stage from others with authority at his company then the opportunity is at risk. If the rep is not already talking to these other executive sponsors at this late stage then this opportunity must be flagged as at risk.
Figure out what your win rates are for each lead source. If an opportunity comes from your low-probability source, it should be flagged as at risk.
Typically, customers will shop around to compare products and prices. If during late stages in the buying process, your sales rep is not aware of which competitors his contact has looked at, then that opportunity should be flagged at risk.
Late Random Additions
Look closely at any large deals (that are more than 2x the average deal size) that were randomly added at the last minute. These should be flagged as at risk.
Keeping track of these 10 sales forecasts killers will allow sales managers to make more accurate sales forecasts.
What other sales forecasts killers would you add to this list?