Spoiler Alert! Your sales forecasts are B.S.

Salespeople are an optimistic bunch. Their steadfast conviction that every deal they are working on is going to close seems to fly in the face of their historical track records. As a person responsible for projecting your organizations sales, or worse, making decisions based on these projections, your risks are high.

Hot, Hot Hot, & Hot Hot Hot

Years ago I had a business partner who was responsible for business development for a company I had at the time. I’ll call him “Tom”, because that was his name. Tom, like most business development people was a very optimistic guy. Like most people in his position he maintained a list of prospects. In order to distinguish the good ones, he had a system where he would tag those as “Hot”. Over time, some of the ones in his “Hot” list progressed farther than others, so he created a new tag for them: “Hot-Hot”. Eventually this same phenomenon led to a “Hot-Hot-Hot”. As an eternal optimist, every contact Tom had was at least “Hot”. So did that mean that every person he met was a “Hot” prospect? No, in reality, Tom had Cold, Warm and Hot prospects, just like we all do, whatever we choose to call them. But the sales psyche has a way of rationalizing what is not always rational. So how do you forecast revenue, when your whole sales team has nothing but varying levels of “Hot” prospects?

How about some sand in your gears

Sandbagging is keeping a good opportunity to yourself until the last second. Why would someone do this? Maybe they want to be a hero. Maybe they are concerned that the deal will be taken away from them, or that they will be hounded for status updates. Maybe they are thinking about leaving and taking it with them. There are any number of reasons sandbaggers sandbag. This practice wreaks havoc on forecasting also. While it may be nice to get a surprise deal you were not expecting, it is not good if you made decisions based on a low projection, like say putting off an acquisition opportunity, that has now passed.

Metrics are good at generating Liars

If you haven’t been to a Science Fiction Fantasy movie in a while, no problem, just ask one of your sales team members to review his pipeline with you. In his mind, the guy who never called him back is still a hot prospect. The deals he did lose were due to extenuating circumstances, i.e. the competitor cheated, the client was a jerk, the specs were wrong, the estimating department blew it, etc. In most organizations, not only is the sales person’s salary tied to their closing ratio, but their very employment at the company is at stake. Is it any wonder that they blow smoke up your ass when asked about their pipeline? But we know this; we have been around the block, and we have your numbers from last month/quarter/year. So now we have to do these other calculations. Bob’s 90%, based on history, is more like 50%. Bill’s 95%, because he is so full of crap and scared of losing his job, is more like 25%. So how do you forecast when you know that everybody is full of shit? Over-optimism and bull shit seem to go hand in hand; where there is one, there is usually the other. Ironically, if you took away the specter of losing their job, and had them on a flat salary, their projections are probably not much different, still bull shit.

Leadership wants to believe

If you are the owner, CEO or Sales Manager, you are guilty also. Guilty of wanting to believe what you know is not true. You are not going to win every piece of business you go after, you never have.  How many times have you signed off on a sales forecast for your boss or board that later  proved to be off… way off. How many times have you accepted a rosy prediction, without asking that one question that might make it less rosy. Your fist pumps over a new prospect are not creating an atmosphere of honesty from your sales team when the deal starts slipping away from them. The good news is that your competitor has the same problems. You both have good and bad salespeople. When one of your bad ones squares off with one of their good ones, you are probably going to lose that business, and vice-versa. So what is the alternative to perfecting the formulas to compensate for the bull shit and optimism variables?

CRM is not the answer

At least not by itself. The fact is that CRM also does an excellent job of generating bull shit pipelines and reports, but presents them as nice looking dashboards of fiction. As a platform, CRM has all of the tools needed for accurate forecasting expect a built-in bull shit detector. Yes, you can lie to your CRM and it won’t know it. As a CRM consultant, I am frequently speaking to companies thinking about implementing a CRM system to create more accurate forecasts. I am just as often on the phone with someone who is trying to figure out why they can’t get accurate forecasts from the CRM the previously deployed. Microsoft has given us some tools and processes to help in Dynamics CRM Online, but many of these tools and processes are misunderstood, bypassed or just plain ignored. Often the conversation with the second caller, who already has CRM, revolves around their desire to implement “Best Practices” on top of the pile of crap they have made in hopes of fixing everything. I find it interesting that the people who claim to not have the budget for an expert up front, seem to find that budget times two to have the expert fix their mess later.

So what are these “Best Practices”?

Well, they are many, and they are unique to your business. If I gave you a checklist, you might hand it to some kid in your office and tell him to go implement CRM. We spend enough time fixing messes, I don’t want to be the cause of any. But I will give you a few things to ponder based on repeated sightings. Leads are not Opportunities, you need to understand why. Opportunities are Cold, Warm or Hot; you need a real criteria to define these. CRM can be deployed to enforce criteria and ask tough questions, but you need to ask the ones it can’t. Don’t bull shit yourself.

Honesty is the ONLY policy

So we all know that Buyers are Liars, but we also know that our sales team are liars to, or at least hedgers. We also know that the only way we can steer the ship with confidence is to have accurate revenue forecasts. We know that CRM can be deployed to not only track all of our leads and opportunities, but can create the forecasts we desire, provided that the data in CRM is complete, accurate and objective. We know that we can implement capabilities in CRM to enforce policies that would require our team to provide answers or information before they can progress a lead or opportunity to the next stage. But none of this works if the data is bull shit. We have to attack that from a different angle. While it is a fact that salespeople who don’t close deals will suffer financially and may well be let go, but this should not be a threat based on projections and pipelines. If it is, you are inviting inflated numbers. As a leader you should celebrate closed deals, not opportunities. Celebrating opportunities leads to pressure to exaggerate the status of that opportunity. Nobody wants to go back to the boss and tell him they lost the opportunity he high-fived them over last week. Too many leaders are asking, almost insisting, that their teams lie to them. When you fix this problem, give us a call and we’ll implement that fancy CRM system you think you need.

The post Spoiler Alert! Your sales forecasts are B.S. first appeared on Steve Mordue MVP.

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