How to Improve Your Sales Forecasts: Accuracy Demands Target Close Dates
Recently, I was in a discussion with a great sales management team. At one point in the discussion, we started discussing forecast and accuracy.
It’s a difficult topic, too often, I think management spends entirely too much time obsessing over the forecasting process.
As we discussed ways to improve forecasting, a key point came up. We can never hope to achieve any level of integrity in our forecasts, until we have integrity in our Target Close Dates.
Achieving our target close dates is critical to improving the integrity of our forecasts, yet too often, sales people and managers spend too little time understanding this issue and trying to drive integrity in our target close dates.
We’ve all participated in endless deal and pipeline reviews where we see the target close date slip and slip and slip. One of the most comical/frustrating one’s happened in a review a few years ago.
- It was a major deal.
- The sales person said, “It’s coming in.”
- The target close date had slipped 11 times in 11 months.
- When I asked him about it, he said, “It’s coming in at the end of the month…..”
I replied, “You said the same thing last month, and the previous month, and the previous month…… Why should we believe you now?” He started waving his hands and blabbering, he didn’t know, it turned out it was all wishful thinking and eventually the deal was abandoned.
Or I ask sales people, “What is driving that target close date?” The response, “I need to make this quarter’s numbers,” “It just felt reasonable,” and on and on and on.
Target Close Dates: Based on What?
Too often, our target close dates are just wild-assed guesses, wishful thinking, or driven by our own needs, not the customer’s business needs.
And we know the result, the dates slip and slip and slip. Consequently, there is no basis for any kind of forecast accuracy.
Sometimes, out of our own needs to hit a forecast or a date, we pressure the customer into placing an order. And we know how much customers appreciate that!
But we can have very high integrity to our target close dates. We do this simply by establishing a target date based on the customer’s need to have a solution in place and producing results.
Several years ago, I was working with a client selling industrial machinery. The machinery was key to a new manufacturing line, supporting a new product launch. We knew hitting the launch date was critical, there was a window of opportunity for their customer to capture several hundred million dollars. If they missed it, they would have to wait a year to capture that opportunity.
Knowing that launch date and the business reason for that date, my client and their customer worked backwards. When does the new manufacturing line need to be in production, what was the lead time on installing/qualifying the line, what was the lead time on building and shipping the machines. Working backwards, my client and their customer established a target close/decision date.
As happens in the buying process, things slip. Some on my client’s side, some on their customer’s side. Usually when that happens, we just slip the target close date. But in this situation, my client was able to sit down with the customer and say, “How do we adjust the buying process to meet that target close date?” Their customer knew the risk of not meeting it was the loss of several $100 million in revenue.
Working backwards, my client and their customer were able do adjust the buying process to meet that target close date, enabling their customer to achieve their business goals.
Target close dates and the integrity of target close dates are critical! Not for us, but for our customers! Every day they slip on their goal of making a decision means a delay in the business results they are trying to achieve. That impact is always far greater to them than the impact of that delay on us.
Align With Customer Deadlines
If we want to achieve forecast integrity, we have to have target close date integrity. We have start measuring ourselves on eliminating or minimizing slipping target close dates.
The only we can have target close date integrity, is to have them established by the customer and driven by when they need to be producing the results that are causing them to buy in the first place.
Ironically, if the customer doesn’t know that, and we can’t help them establish it, we don’t have a qualified opportunity.
It’s remarkable how simple things become when we put the customer and their business results first–letting that drive a buying cadence they and we are working to achieve. As things slip in the process, we work, collaboratively, figuring out what we need to do help the customer achieve their goal.