ENTERPRISE SALES PROCESS & FORECASTING DONE RIGHT — Part 3
By: Brett Queener
Tags: Startup, Pipeline, Sales Operations, Sales, Forecasting

Forecasting Success: Percentages Don’t Work. Leverage all we have learned and implemented to forecast like a pro.

I worked for 17 years at Siebel Systems and salesforce.com. I promise I had nothing to do with implementing the concept of a percentage tied to a given sales stage. I had nothing to do with the crazy notion that you then calculate your pipeline by multiplying the sum of the amount of all deals within a stage by a given percentage per stage.

This approach might make sense for a high volume inbound business when you have historically accurate data to apply such math, but for enterprise forecasting, this is pure silliness. You never win 25% of a deal — you either get it or you don’t. When organizations do implement this silly applied math approach, I often see sales leaders often changing the sales stage of a deal backward (even if that’s not where the deal and buyer mindset naturally lies) to exclude the higher calculated amount from the sales forecast — which of course isn’t helping anyone.

So instead, just follow the steps below, and you and your organization will be quickly on its way to forecasting mastery:

Let your deals sit in their proper stage and forecast pipeline category based on where accurately the buyer is in evaluating your product. Ensure the close dates are correct — i.e., the customer has a hard budget line or a hard go-live date or a renewal coming up for a product you are replacing or some other compelling event where that date makes sense. Ensure that your teams are disciplined in this — it not only helps for the current quarter but truly helps you understand the quality and amount of future quarter pipeline (key for understanding if it’s time to step on the AE hiring gas). These deals, with their proper close dates, represent your actual pipeline for a quarter and shows you how much you have for the period and how advanced it is at the meta category level (i.e., Pipeline, Best Case, Commit). It doesn’t, however, give you the number you are forecasting will close. The number you want, often referred to as the “in-blood” number (learned from working for the sales legend Craig Ramsey at Siebel Systems), is calculated differently. To come up with this number (ie, the one you commit to your board as well as us to properly manage your expenses and burn, you should get deal specific. You should now have a set of deals that are sitting in commit (we have been selected and are negotiating), in best case (there is a funded project for which we have not yet been given the nod) and in pipeline (we are having good conversations and we believe that it will be a funded project with a chance customer will select and sign in this period). Note: I always chuckle on pipeline deals in enterprise sales with a close date in a current quarter — good luck with that. As to “I do it to ensure visibility,” that’s a weak excuse — you should always be looking at your top deals for the next 6–9 months because to win them later means you need to put the hard work in now. Now you apply some deal-specific insight into whether or not to include a deal from the Best Case or Commit categories in your forecast. For deals in Commit Category, where the only risk is truly timing Risk (ie, can’t be vendor risk as you have been selected and cant be funding risk as this is a funded project ), you can remove a deal from your number if you simply do not trust the customer’s ability to get to a signed contract in the period. There shouldn’t be many of these. For deals in Best Case Category, there are two risks — Vendor risk (ie, have you been selected) and Timing Risk (see above). If you believe you can both be selected and get it done this period, then include it in your number. If not, exclude from your number. For deals in Pipeline Category, dig in to understand if this is timed correctly for the period. As a rule of thumb for enterprise sales, I never include a deal in pipeline category in an actual forecast number.

Aside from coming up with a more accurate forecast number, you can also create a common language and understanding to the specific paths to increasing that number to do better. For each deal in your given category that isn’t in your forecast number, do the following to try to move them over the finish line as well:

Commit Category : drive your team to remove any remaining obstacles the buyer throws up, finalize deployment plans, and get those contracts and redlines done.

: drive your team to remove any remaining obstacles the buyer throws up, finalize deployment plans, and get those contracts and redlines done. Best Case Category : drive your team to nail reference calls, differentiate strongly, provide compelling proposals and convincing implementation plans to get selected.

: drive your team to nail reference calls, differentiate strongly, provide compelling proposals and convincing implementation plans to get selected. Pipeline Category: sure, whatever.

In addition to a more accurate forecast number, you can also provide a rational justification for an upside range by speaking to the excluded from your forecast deals that are in the Best Case and Commit Category.